Research On The Impact Of Local Government Debt On Capital Allocation Efficiency

Since the reform and opening-up,China’s economy development has experienced nearly 40 years of rapid growth,the total economic volume is second only to the United States,and the overall economic situation has also undergone tremendous changes.At present,the growth rate of China’s economic development is gradually slowing down,and the extensive economic growth mode of simply increasing the input of factors(including capital,labor,etc.)to promote economic growth has become unsustainable.The report of the 19th National Congress of the Communist Party of China also clearly pointed out that " China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development".To achieve high-quality economic development,we need to improve total factor productivity.Therefore,improving the efficiency of resource allocation has become the key.The effective allocation of capital is the driving force that drives the allocation of other production factors.Therefore,how to improve the efficiency of capital allocation has gradually become the focus of economic reform and academic topics.The vertical fiscal imbalance caused by the reform of the tax-sharing system under the fiscal decentralization system,the unreasonable design of the incentive mechanism for official promotion under the political centralization system,the problem of multiple soft budget constraints under the central-local game and financial decentralization,and the land finance under the land system arrangement lead to the continuous expansion of the scale of local government debt,increasing risk and increasing uncertainty of the impact on economic development.The large-scale local government debt,as the economic resources that local governments compete for regional economic development,is an important support for government investment.It is more an administrative power to participate in the allocation of economic resources.Therefore,the source,destination and scale of local government debt are likely to have an impact on the efficiency of capital allocation.As an important economic resource for local governments to develop regional economy,how does the local government debt affect the efficiency of capital allocation?Studying this issue can better understand the economic effect of local government debt,and provide practical basis for local government debt management,improving the efficiency of capital allocation and achieving high-quality economic growth.In view of this,this paper takes "The Impact of Local Government Debt on Capital Allocation Efficiency" as the theme,and mainly studies the impact and mechanism of local government debt on capital allocation efficiency at the enterprise,industry and regional levels under the requirements of high-quality economic development.At the enterprise level,there is a close relationship between state-owned enterprises and local governments,therefore this paper mainly studies the impact of local government debt on the investment efficiency of state-owned enterprises.At the industry level,taking the industrial sector as the main body of the real economy,this paper studies the impact of local government debt on the efficiency of capital allocation of the real economy.At the regional level,combining with the institutional background of fiscal decentralization and political centralization in China,this paper focuses on the spatial spillover effect of local government debt competition on regional capital misallocation.The main conclusions are as follows:(1)Local government debt will reduce the investment efficiency of state-owned enterprises,therefore it can affect the capital allocation efficiency at the enterprise level.① The expansion of local government debt reduces the investment efficiency of state-owned enterprises significantly,which is mainly reflected in the aggravation of overinvestment instead of underinvestment.②The analysis of the intermediary mechanism finds that the excessive debt of state-owned enterprises plays a partial mediating role in the relationship between the local government debt expansion and the overinvestment of state-owned enterprises.③From the perspective of stateowned enterprise governance and local government governance,the heterogeneity analysis of the process of " Mixed ownership reform of state-owned enterprises" and "Sunny Finance" is carried out.It is found that local government debt expansion plays a more significant role in reducing the investment efficiency of state-owned enterprises and increasing the overinvestment of stateowned enterprises in the samples with low-level equity balance and fiscal transparency.(2)There is a nonlinear relationship between local government debt and the capital allocation efficiency of the real economy,therefore it can affect the capital allocation efficiency at the industry level.①There is an inverted U-shaped nonlinear relationship between the local government debt and the capital allocation efficiency of the real economy,that is,the appropriate scale of local government debt can provide a good development environment for high growth industries by improving infrastructure construction and improving the level of financial development,therefore it can promote the efficiency of capital allocation of the real economy.Once the expansion of local government debt exceeds a certain threshold,its negative effects begin to appear.②The analysis of the intermediary mechanism shows that local government debt mainly affects the capital allocation efficiency of the real economy by affecting the real estate price.③Based on the heterogeneity analysis of regions,marketization level and fiscal independence,the results show that the inverted U-shaped relationship between local government debt and capital allocation efficiency of the real economy is more significant in the samples of central and western regions,low levels of marketization and low levels of fiscal independence.(3)Local government debt competition has a positive spatial spillover effect on regional capital misallocation,therefore it can affect the efficiency of capital allocation at the regional level.①There is a strategic complementarity relationship between local governments in terms of borrowing(that is,local government debt competition).②There is a U-shaped relationship between local government debt and regional capital misallocation.③Local government debt competition has a significant positive spillover effect on regional capital misallocation.④In the analysis of the impact mechanism,it is found that the fiscal expenditure competition and soft budget constraints intensify the role of local government debt in promoting regional misallocation.And the improvement of the degree of marketization can not only alleviate the promotion effect of local government debt on capital misallocation in this region,but also weaken the promotion effect of local government debt in adjacent regions on capital misallocation in this region.The main research contributions of this paper are as follows:(1)Different from the existing literature,this paper focuses on the efficiency of capital allocation from the perspective of the economic impact of local government debt,and comprehensively considers the impact of local government debt on the efficiency of capital allocation at the enterprise,industry and regional levels by using a variety of methods to measure the efficiency of capital allocation.(2)This paper empirically tests the mechanism of the effect of local government debt on the capital allocation efficiency at different levels.(3)This paper constructs a yardstick competition model including local government,enterprises and households,deduces the existence of local government debt competition and its spatial spillover effect on regional capital misallocation by using the theoretical model,and empirically verifies it by using the spatial econometric model.