Research On The Impact Of Local Government Debt On Regional Economic Growth

In 1950,China issued the first national debt “The People's Triumphant Public Debt” after the founding of New China,which marked the beginning of the government's debt in China.In 1978,China's implementation of the basic national policy of reform and opening up marked the beginning of the socialist market economy with Chinese characteristics.With the development in the last 40 years,China has become the world's second largest economy.In 1994,China's imitation of market economy countries implemented a fiscal and taxation system with a taxsharing system as the main body,and redefined the financial power and power of the central government and local governments according to the level of government.On the one hand,it strengthened the central government's control of tax revenue sources,and on the other hand,increased the enthusiasm of local governments for taxation.In 2008,in order to cope with the global economic recession,China adopted an expansionary fiscal policy and implemented a 4 trillion public investment stimulus plan,of which the central government only shouldered 1.18 trillion,and the rest needed local government funding.So,Local governments have borrowed a lot of money,making the scale of local government debt soar.From the above events,it can be seen that the expansion of government debt has,to a certain extent,boosted the growth of the regional economy at this level.At the same time,economic crisis incidents caused by government debt have also been occurring on a global scale.For example:In the 1980 s,due to the excessive dependence on foreign debt,the economic crisis caused by the debt crisis generally broke out in Latin American countries;In 2008,the United States experienced a subprime mortgage crisis;In 2009,European debt crisis began in Greece;In July 2013,the Detroit city government broke the bankruptcy crisis.It can be seen from these that the expansion of government debt has caused the economic crisis to some extent.Therefore,the main purpose of this paper is to study the impact of local government debt on the regional economy.The research thinking is as follows:First,we review and summarize the domestic and foreign literature review from both theoretical and empirical analysis.The literature review of theoretical research can be summarized as follows: government financing is conducive to the healthy development of the economy;the increase in government debt will have an effect of crowding out of investment,is not conducive to economic growth;the impact of government debt on the economy is neutral;the impact of government debt on the economy is non-linear,and there is a threshold effect,with inverted "U"-type characteristics.The literature review of empirical analysis can be summarized as follows: government debt has a positive and significant effect on economic growth;government debt has a threshold effect on economic growth,has an inverted “U” type trait,and estimates a threshold interval.Second,analyze the current situation of China's local government debt.Comparing the results of the three audits,we will elaborate on the growth rate of local government debt,the origin of debt,the direction of debt,scale,risk indicators,and the proportion of debt government levels.Finally,an empirical analysis of the economic impact of local government debt is conducted.This paper adopts 31 provincial-level panel data from 1997 to 2013 and uses a two-way fixed effect model to conduct empirical analysis.It is concluded that the impact of local government debt on regional economic growth is significant;in the original model,the square item of local debt is added to check whether there is an inverted "U" type feature;the sample is then divided into the east,middle,and west,and the effect of local government debt on economic growth under regional differences is studied;and empirical results are summarized to provide reasonable scientific policy recommendations.