Study On The Economic Growth Effect Of Local Government Debt From The Perspective Of Government Heterogeneity

The existing studies on the scale of local government debt mostly focus on the causes,development and financial sustainability of the optimal scale calculation.With the expansion of local government debt scale,the study of local government debt and into economic growth under the perspective of debt scale suitability study,more articles that local government debt on economic growth is a threshold value,when the debt is less than this value,the local government debt to realize regional economic growth;When the debt scale exceeds this value,it will have an inhibitory effect on economic growth.Therefore,a specific value is put forward as the criterion for the reasonableness of debt,which is used as the basis for restraining local government borrowing,and figured out the very threshold value of local government debt in three regions: the eastern the middle and western region.This simple logic describes the positive and negative effects of local government debt on regional economy,and emphasizes the debt risk.Although these studies have revealed the general role of local government debt,they have not studied the impact of local government debt on investment and total factor productivity.As China's economy enters “a new normal”,the central government is pushing for new infrastructure to drive economic growth and advocates the transformation of high-quality economic growth.Study on whether the local government debt still have a positive impact on economic growth via stimulate the investment and improve the efficiency of technology and technological progress deserves a practical and a policy value.In addition,studying the heterogeneity of government factors is also helpful to adjust the relationship between the upper and lower levels of the government and improve the government's own ability to deal with the impact of government debt on the economy.Therefore,three questions are raised: 1.Does local government debt still promote economic growth? 2.How to realize the function mechanism of local government debt on economic growth? 3.Besides regional heterogeneity,are there other factors affecting the effect of local government debt on economic growth?Firstly,the economic growth effect of local government debt is studied through theoretical analysis and empirical analysis.This paper analyzes the impact of government debt on economic growth by constructing a generation overlapping endogenous growth model.Under the stable condition,on the whole,China's government debt has a significant promoting effect on economic growth.And then makes an empirical analysis on the basis of theoretical analysis,using the level of local government bonds as explicit debt proxy variables,urban construction investment bonds as the recessive debt agent,inspection level local government debt impact on regional economic growth,and dealing with endogenous System GMM model and by using the core variables transformation robustness test.Secondly,the mechanism of local government debt on economic growth is analyzed by means of mediating effect model.This paper examines the channel of local government debt affecting local economic growth,and describes the influence of local government debt on local economy in prefecture-level cities from two aspects of regional investment rate and regional total factor growth rate.Thirdly,the moderating effect model is used to analyze the influence of government heterogeneity on the economic growth effect of debt.Considering the heterogeneity of local governments of prefecture-level cities in China due to the constraints of financial system and their own financial resources,the influence of local government debt on economic growth is different among prefecture-level cities under different conditions.Therefore,based on the factors of fiscal decentralization and regional competition pressure in fiscal system,the factors of breaking budget constraint in fiscal resources,the factors of financial decentralization and the factors of financial development level,the effect of local government debt of prefecturelevel cities on local economic development is tested.The research conclusions of this paper are as follows:Firstly,explicit debt index and implicit debt index are adopted to conduct two-way fixed effect regression.After System GMM regression,it is found that the debt of local governments in prefecture-level cities is positively correlated with economic growth rate from 2010 to 2016.However,there is no significant critical value of local government debt in promoting economic growth.The inference in the theoretical model is verified.The data and empirical analysis prove that local government debt still promotes regional economic growth.Secondly,the local government debt of prefecture-level cities promotes the development of regional economy by increasing the investment rate and accumulating capital stock.The local government debt of prefecture-level cities improves the total factor productivity of the region by improving the technical efficiency and technological progress,thus promoting the development of regional economy.The data and empirical analysis prove that prefecture-level city local government debt can promote regional economic growth by promoting local investment and changing regional technological progress.Thirdly,the heterogeneity is discussed.The heterogeneity of government is analyzed from the financial system constraint of local government and the financial resource constraint of local government itself.The study finds that under the heterogeneous fiscal system with fiscal decentralization and regional competitive pressure as indicators,the higher the local government's control over fiscal expenditure,the higher the degree of autonomy over fiscal expenditure,and the greater the influence of local government debt on the promotion of regional economic growth.The greater the development pressure,the farther the gap between GDP ranking and the yardstick,and the greater the impact of local government debt on regional economic growth.With the heterogeneity of local government financial resources as the indicators of extrabudgetary land transfer income,financial development level and financial decentralization level,the higher the level of regional land transfer,the deeper the local government intervention in financial resources and the higher the level of financial development,the stronger the role of local government debt in promoting regional economic growth.In addition,it is found that regional competitive pressure and financial decentralization have no significant effect on the explicit debt of local governments after 2014,which may be the effect of debt limit management.It can be seen that in addition to the influence of regional heterogeneity,the financial system constraints and financial resources constraints on local governments also have an impact on the economic growth effect of debt.Main innovations of this paper:(1)Expand the research on the relationship between debt and economic growth in developing countries.The existing studies on government debt and economic growth mostly focus on the sample data of western developed countries,with the purpose to solve the problem of economic growth faced by developed countries with high debt.Lack of systematic research on the relationship between debt and economic growth in developing countries with government debt accumulating under the global financial crisis.Existing studies on the relationship between local government debt and economic growth in China are also controversial.Overall growth in this paper,based on the Chinese government debt,but local government debt scale and growth than the objective facts of the central government debt,on the city level government debt data through theoretical analysis and empirical and the relationship between economic growth and,in developing countries has been expanded on government debt affect economic growth empirical literature.(2)It makes up the deficiency of existing research on the influence mechanism of "debteconomic growth".Existing literatures focus on the promotion or inhibition of local government debt scale on economic growth,but lack of further research on the transmission mechanism between local government debt and regional economic development.This study organically combines local debt,regional investment rate growth,regional total factor productivity including technological efficiency and technological progress with regional economic growth.From the perspective of driving regional investment rate and promoting regional total factor productivity,this paper makes a deeper study on the relationship between local government debt and economic growth,reveals the driving source of local government debt driving economic growth,and makes up for the shortcoming of most empirical studies that are too single.(3)Factors influencing the heterogeneity of local governments in local government debt are considered.Existing researches mainly focus on the impact of local government debt itself on local economic growth,or focus more on the differences in spatial geographic regions.This study focuses on the heterogeneity of local governments and studies the effects of local government debt on economic growth under different influencing factors from the perspectives of financial system constraints and financial resources.To straighten out the relationship between governments and mobilize local government financial resources to play a better role in guiding the economic effect of local government debt.(4)the sample data is more comprehensive,compared with the existing in the study of local government debt more used in a variety of proxy variables,such as “land auction” income,the local government budget deficits,infrastructure investments etc.,this research adopts the balance of government debt announced by the local Ministry of Finance and "the city of debt" data in the database of Wind.Moreover,the research object chooses prefecture-level city level,which is more in-depth compared with provincial debt.To sum up,based on the data of local government debt in prefecture-level cities,this study studies the level of influence of local government debt on regional economic development and its mechanism.It not only makes up for the defects of relevant researches theoretically,but also provides empirical experience for the new round of investment and economic development transformation driven by new infrastructure in reality.It also provides practical evidence for rationalizing the relationship between the upper and lower levels of the government and rationally utilizing the government's own financial resources.