Research On The Impact Of Local Government Debt On Urban-Rural Income Inequality

The report of the 19 th National Congress of the Communist Party of China points out that the socialism with Chinese characteristics into a new era,the social principal contradiction has been converted to the good life is people’s increasing needs and not balance the contradiction between the inadequate development,urban and rural residents in the Shared economic development differences become one of the important influencing factors of inadequate development not balanced,has been the focus of the government and academia.In recent years,although the urban-rural income gap in China has been narrowing on the whole,it is still on the high side compared with other countries in the world.Under the influence of resource endowment difference,urban-rural dual economic structure,government policy orientation and other factors,it is an unavoidable reality that urban-rural income gap has long existed.Therefore,to seek and solve the effective governance mechanism and means to improve the income distribution between urban and rural areas has become a realistic subject that the government and the academic community need to think about.As an important part of macro-control and active fiscal policy,local government debt is closely related to China’s fiscal system,financial system and land management system,and its impact on the income distribution of urban and rural residents should be discussed.According to data released by the Ministry of Finance,by the end of 2020,the size of local governments included in the fiscal budget had reached 25.66 trillion yuan,more than a quarter of that year’s GDP.Such a large scale of local government debt has become an important fiscal policy for local governments to make up for financial insufficiency,promote infrastructure construction and balance regional economic development,so its social welfare effects cannot be ignored.In the inventory of local government debt scale,investment,distribution,allocation efficiency affects factors of production such as capital and labor elements orderly flow between the urban and rural areas,and integrated urban-rural development and the influence of urban-rural income distribution,and the urban and rural income distribution effects of local government debt should be a fiscal redistribution field an important issue that nots allow to ignore.Existing studies mainly focus on the economic efficiency and better control of local government debt,but there are few researches on the role of local government debt about urban-rural income distribution.In view of this,this thesis takes the relationship between local government debt and urban-rural income gap as the starting point,takes the expansion of local government debt and its governance as the research perspective,takes the urban-rural income gap as the research object,and systematically studies the influence and internal mechanism of local government debt on urban-rural income gap from experience analysis and empirical test perspectives.It provides reference for policy makers to improve local government debt system and income distribution policy.Articles according to literature review,theoretical analysis and the present condition of the mechanism of action-description-empirically-policy recommendations "analytical thinking,get the following conclusion: the expansion of local government debt to narrow the income gap between urban and rural areas,the development of urbanization,industrial structure upgrade and development of real estate is local government debt expansion to narrow the income gap between urban and rural areas the main transmission mechanism;Under different institutional environments and economic development,local government expansion has different effects on narrowing the income gap between urban and rural areas.Local government bond issuance and interest repayments have widened the income gap between urban and rural areas;Local government debt governance has significantly improved the urban-rural income gap,and alleviated distorted reallocation of financial resources and the transformation of government economic behavior,thus reducing the urban-rural income gap;The effect of local government debt governance on narrowing urban-rural income gap is affected by marketization and fiscal equalization.First,the theoretical basis of this thesis is constructed from market failure theory,public choice theory,welfare economy theory and population mobility theory,and the economic logic of the impact of local government debt on urban-rural income gap is analyzed.Secondly,based on the theoretical mechanism analysis of local government debt expansion,the results show that debt financing mode,expenditure direction,debt repayment pressure,etc.,affect the allocation of financial resources,the return of factors of production,real estate prices,and then affect the urban-rural income gap.Finally,based on the theoretical mechanism analysis of local government debt governance,the results show that local government debt governance alleviates the local government’s distorted allocation of financial resources and forces the local government to adjust the structure of fiscal expenditure,thus affecting the urban-rural income gap.Second,it analyzes the development process and typical facts of local government debt.Specifically,the change of fiscal system and financial system is the institutional cause of the change of local government debt in China;The stock of debt is huge,the overall trend of the stage rise;The total amount of explicit debt is controllable,while the amount of implicit debt is huge.Regional development of local government debt is unbalanced.The better the foundation of economic development is,the larger the scale of local government debt will be.The debt burden and debt paying ability show regional regressiveness.The debt burden and debt stress are higher in central and western regions.The scope of debt investment has been gradually expanded,the maturity structure of debt has become more reasonable,the subjects of debt borrowing has been gradually standardized,and the subjects of investment have become more diversified.China’s local government debt has experienced an upgrade from the traditional performance-driven governance mode to performance-constrained debt governance mode,and local government debt governance is more standardized,transparent and institutionalized.Thirdly,after sorting out the measurement methods of urban-rural income gap,the regional decomposition and time series decomposition of urban-rural income gap are completed through urban-rural income ratio,Theil index method,Dagum Gini coefficient and convergence method,and then the spatio-temporal evolution process of income distribution of urban and rural residents in China is investigated.China’s overall income distribution,urban residents income gap,rural residents income gap and urban-rural income gap showed a trend of narrowing during the sample period.Through the relationship between various income gaps in China,it can be seen that the urban-rural income gap is the main source of residents’ income gap,and its contribution rate exceeds 70%.In terms of regional differences,the urban-rural income gap shows unbalanced regional development.The income gap within rural areas is larger than that within urban areas,and the urban-rural income gap in central and western regions is significantly higher than that in eastern region.From the source of urban-rural income gap,wage income gap is the most important factor,followed by transfer income as well as property income,and the impact of operating income is negative.Fourthly,based on the macro panel data of 30 provinces in China from 2009 to 2019,using bidirectional fixed effect model,instrumental variable model,intermediary effect model and other measurement methods to empirically test the role of local government debt expansion on urban-rural income gap,and the conclusions are as follows: As an important tool of fiscal policy,local government debt plays a "reverse adjustment" function of fiscal redistribution,and plays a positive role in improving the urban-rural income gap.For every unit increase in local government debt,the urban-rural disposable income ratio,Theil entropy index and Gini coefficient will fall by 0.291 units,0.024 units and 0.011 units respectively.With the increase of debt pressure,the impact of local government debt expansion on urban-rural income gap is still significantly negative,but the negative impact gradually weakens.The results of the mechanism study show that the expansion of local government debt has promoted the development of urbanization,promoted the upgrading of industrial structure,and converged the urban-rural income distribution.Local government debt promoted the real estate boom and widened the gap in income distribution.However,the negative effects of real estate development did not offset the positive influences of the expansion of local government debt,and the overall urban-rural income gap narrowed.The results of heterogeneity analysis show that the role of the growth of local government debt on urban-rural income distribution is closely related to the institutional environment of each region.In areas with better financial ecological environment and higher fiscal health,the expansion of local government debt significantly reduces the urban-rural income gap.The expansion of local government debt in eastern regions and economically developed regions has a more significant effect on improving urban-rural income distribution.The results of debt structure analysis show that local government bond issuance and interest payment have widened the urban-rural income distribution gap.Fifthly,based on the panel data of 30 provinces from 2009 to 2019,the implementation of the Budget Law of the People’s Republic of China(revised in 2014)was taken as the exogenous impact of local government debt governance,and the INTENSITY DID model of "quasi-policy experiment" was constructed to empirically analyze the causal effect of local government debt governance on urban-rural income gap.The conclusions are as follows: as an important fiscal policy practice,local government debt governance can effectively narrow the urban-rural income gap.Under the intensity index and 75% index,the Gini coefficient of income distribution gap decreases by 0.042 and 0.019 units respectively.The results of dynamic effect analysis show that the impact of local government debt governance on urban-rural income gap began to play a role in 2015 and continues to have an impact.The results of mechanism analysis show that local government debt governance can improve the income distribution between urban and rural areas by promoting financial "de-virtual to real" and enhancing financial support for real economy.Local government debt governance forces local governments to actively improve the structure of fiscal expenditure through "fiscal consolidation",thus improving the urban-rural income distribution.Heterogeneity test results show that the impact of local government debt governance on urban-rural income distribution is closely related to the degree of marketization and financial imbalance in each region.In regions with high marketization degree and low financial imbalance degree,the effect of local government debt governance on urban-rural income gap is more significant.Finally,from the perspective of local government debt,This thesis suggestions are put forward to improve income distribution.(1)Promoting the healthy development of local government debt and efficient allocation of resources.Promote the transformation of financing platforms and assist urban and rural infrastructure construction;We will properly determine the scale of local government debt to boost urbanization and industrial development.We will improve the structure of local government debt investment,increase the efficiency of local government debt investment,and enhance local governments’ ability to absorb and pay debts.(2)Strengthen policy coordination and cooperation,and guide funds to move from virtual to real.Harden financial budget constraint,restrain government credit unlimited expansion;Optimize the financial ecological environment,reverse the situation that local government investment forces credit at the expense of others and improve the quality and efficiency of financial services for the real economy;restrain the excessive rise of housing prices and alleviate the real estate bubble.(3)Improve relevant institutions to narrow the urban-rural income gap.Promote the rational flow of factors of production,optimize the allocation of urban and rural resources;Promote industrial development system innovation,boost urban and rural industrial development;We will improve the system for assessing officials’ performance,reshape government incentives,and encourage urban and rural residents to share the benefits of debt and economic development.