Local Debt Financing And Official Promotion Mechanism

Correctly handling the relationship between the central government and the local government and improving the governance system for local officials has important practical significance for the long-term development of the centralized state system.Local competition under fiscal decentralization constitutes an important institutional background for the "Chinese miracle".In fact,it is precisely because of the problem of entrusted agency between the central and local governments.Fiscal decentralization has enabled local officials to have greater autonomy over local fiscal revenues and expenditures and has played a more significant role in regional economic activities.However,the expansion of the degree of decentralization also means that local governments have greater ability to interfere with the market,and even for the sake of personal interests will invest financial revenue into projects more conducive to their promotion.The trade-off of fiscal decentralization is related to the incentive and supervision of local officials.Therefore,how to ensure the effectiveness and fairness of officials' evaluation and selection system has become an important dimension to be considered in the process of fiscal decentralization.In 2008,when the global financial crisis broke out,the Chinese Central Government urgently issued a four trillion stimulus plan to stabilize the macro economy,and most of the funds were supported by local governments.To this end,the central government relaxed the restrictions on local governments from allowing debt financing,and the Pandora's box of local government debt financing was opened.The once again increase in the financial resources of local governments has changed the original situation of central-local decentralization.Then,what impact does the increase in local government financial resources have on the original system of official governance?The expansion of local debt after the financial crisis can be used as a reflection of the central government's change in local fiscal power control,providing an excellent empirical sample of research issues.This article mass for debt issued by city as the breakthrough point,inspected the local debt issuance for the official promotion mechanism,the influence of and the mechanism of the effects are analyzed,and to explore the local government off-budget income sudden increase effectiveness and fairness of official promotion mechanism.The research ideas and framework of the thesis follow the research paradigm from normative to empirical.In the first chapter,the paper puts forward the research question of this paper:how local debt affects the promotion of officials and the mechanism of promotion of officials.The article reviews the promotion of officials from the financial decentralization,the influence of China's political system and local debts and local debts.Next,the research framework and research methods of this paper are introduced.The second chapter introduces the local debt financing and the promotion mechanism of officials.Chapters 3 to 7 are the main parts of this article.The third chapter is the analysis framework chapter of this paper.This chapter firstly discusses the logic of local debt affecting the promotion mechanism of local officials from the theoretical level.Local debt financing increases the local government financial means,so local officials have more means to meet performance targets set by the central,show their own ability and acquire political promotion,and ensure to achieve the goal of "be" assessment and selection mechanism.However,the increase of financial means,may also lead to local officials to "shortcuts" and complete face engineering construction and even took the form of bribery to the fuzzy and interference by the central government to the local officials signal recognition,destroy the effectiveness of the officials selection mechanism.Next,based on city investment bond issuance data as proxy variable of local debt,manually collecting Chinese cities as leader position change data and the individual characteristics of official data,with the city investment bond data and related economic data matching,the local debt issue how to influence the local officials for promotion to the overall effect of empirical research,it is found that the city for issuance of official promotions have a significant positive effect,will happen in the town of issue about two to three years after the debt,and the bigger issue,the issue,the more the more the promoting effect.Moreover,the empirical analysis also found that the higher the economic growth rate,the greater the adjustment and optimization of the industrial structure,the more likely the officials were to be promoted.Finally,this chapter demonstrates that local debt reduces the promotion effect of economic growth on the promotion of officials,thus confirming the existence of the distorted effect of local debt on the promotion mechanism of officials.In China's main official selection to GDP growth for political background,the assessment standard of debt income distorts the existing economic growth as the core of the promotion mechanism,undermining the fairness of the official selection system.Therefore,from the perspective of undermining the state governance system,the massive and disorderly issuance of local debt is actually a resource curse.The following four chapters will examine the effect of promotion mechanism of local debts from two aspects:promotion and destruction mechanism.Among them,the fourth and fifth chapter investigates the local debt have positive effect on official promotion mechanism may be:"official promotion tournament theory" argues that local government officials to promotion and promoting regional economic development,so the central government to local debt relaxation to ensure that the local governments have more financial resources adopted a policy of economic intervention,which can differentiate to send out signals of their own capabilities,to ensure the smooth enforcement of the official promotion mechanism,is advantageous to the epicenter to solve the principal-agent problems.Chapter 6 and 7 of the inspected by the local debt to official promotion mechanism may produce negative effects:the increase of the local government financial means to local officials for greater ability to interfere with the central officials ability signal acquisition,thus cause distortion and destruction of official promotion mechanism.Chapter four investigates the role of local debt financing in regional economic growth.This chapter first theoretically expounds the possibility of debt income effects on economic growth,and then empirically the relationship between the local debt and economic growth,the result shows that from the sample to see the city for bond issuance promoted the economic development in the region.Next,divided into eastern,central and western regions the heterogeneity analysis,the results show thatin the east,the central region,the local debt do have promoting effect to regional economic growth,for the western region,issuance produced no significant effect of economic growth.Therefore,the conclusion of this chapter means that promoting regional economic growth is an important way for local debt issuance to influence the promotion of officials.The fifth chapter investigates the influence of local debt financing on regional industrial structure.This chapter first summarizes the logic of industry change from the theory,on the basis of the analysis of the possibility of a local debt adjustment industrial structure,and then empirically carried out,the results showed that,from the national sample city investment bond issuance to promote the adjustment of industrial structure optimization.Further heterogeneity analysis shows that the industrial structure effect of local debt is very obvious in the eastern region,while it is not significant in the central and western regions.According to the analysis of the"industrial structure positively affecting the promotion of officials" in chapter 3,it can be seen that the adjustment of industrial structure is another way for local debt issuance to influence the promotion of officials.As can be seen by the fourth and fifth chapter,local debt affect the promotion of research way and the central government "growth" and "restructuring" goal is consistent,in the context of the local officials in promotion can guarantee the stability of the principal-agent relationship between the central government and local government and good development.Local officials' increased financial resources under the promotion of promotion will enable them to better accomplish the central economic development goals,thus ensuring the realization of the ultimate goal of the officials' governance system.Next,chapter 6 and 7 discuss the distorting effect of local debt on the promotion mechanism of officials.Sixth chapter found that place that will promote by means of regional image construction and bribery official promotion,this means that the local debt relaxation can distort the promotion mechanism of "be",also not conducive to the overall economic development of the long-term goals,which could destabilise the principal-agent relationship between the central government and local government and good development.In addition,if the local government officials both in order to promote the economic development of high quality,still can be in the form of"shortcuts" by selling bonds get promotion,local government officials should be paid attention to when the debt investment project quality,will only blindly debt issuance.This explains the rapid expansion of local debt.So,the central government to the local debt to relax will allow local governments to issue bonds,selective results may lead to the finances of the region into a "debt trap",not only to the officials themselves spread negative signals,ability and moral quality is bad for their promotion,also the bad effects on the region's long-term development,undermining the purpose of the official selection mechanism.Chapter 7 examines this,and it turns out that there is a potential for fiscal tightening to fall into the "local debt trap":cities with less land income are bigger;And a reduction in land revenue would raise the risk of issuing bonds,raising the cost of issuing debt,confirming the speculation.In addition,the discovery of this chapter also means the non-randomness of local debt issuance and the necessity of solving the local debt endogenous problem.This paper argues that reasonable local government debt orientation and debt scale can guarantee the efficiency and quality of officials' governance.Debt financing can make the "elite" officials to give full play to their own management ability,by promoting economic growth and industrial structure adjustment get superior leadership attaches great importance to,promotion,the entire process to promote the effectiveness of the promotion mechanism;While the local government debt to inappropriate and debt officials make official promotion mechanism cannot effectively identification and damage the fairness of the promotion mechanism,local officials may also induce "local debt trap" at the same time,have a negative impact on the central government targets.Current political and economic system in our country,on the basis of the analysis of the effect of local debt for the official promotion mechanism,can not only deepen the understanding of local debt issuance consequences,deepen the understanding of the current official management system in our country,also helps to clarify the central-local fiscal relations,to central decentralization degree of a further understanding of dynamic adjustment.In terms of the policy implications of this article,on the one hand,the central government needs to be properly planning and reasonable standards of local government debt,should perfect relevant legal system at the same time,local officials to avoid using debt to income into the wrong;Given the debt financing,on the other hand,as a financial guarantee of local government to promote regional development means,shoulds not be too much emphasis on local debt crisis,and even"one-size-fits-all" to cancel the local debt financing behavior,in order to prevent the economic development of local government officials the ability and enthusiasm of immeasurable negative impact.