Local Government Debt Competition In China:An Empirical Study Based On Provincial And Municipal Spatial Panel Data

According to the rapid expansion of the scale of local government debt,the past literature more has studied the mechanism of the impact of fiscal decentralization on the size of government debt.This paper argues that the traditional fiscal decentralization theory cannot fully explain the motivation of the rapid expansion of debt scale.Therefore,we try to use the local government debt as a start to study the existence of China's local government debt competition behavior and its impact on the scale of debt.There are relatively few related studies on local government debt competition.In addition,the existing literature mostly conducts empirical research on local government debt,and it lacks attention to the new financing mechanism.This paper attempts to make up for the above shortcomings.The local government debt is subdivided into general debt and special debt,and its impact on debt size is discussed separately from theoretical models and empirical studies.Firstly,this paper constructs a model of local government debt competition involving central government,local government,representative enterprises and residents' four-sector economies.The local government debt is introduced into the production function,utility function and official promotion probability function of the economy.We use the economy to realize its behavioral motives to maximize the objective function,and derive the research hypothesis of debt competition behavior among local governments in China.Secondly,based on 2014-2017 data,on the basis of the completion of local government debt,using the China local government debt increment data in 2015-2017(subdivided into general debt increment and special debt increment),construct a provincial and municipal spatial econometric model,and test the correctness of the hypothesis in the theoretical model.At the same time,it further explores the extent of the impact of debt competition among provincial and municipal local governments on the scale of debt borrowing.The study found that debt competition among provincial-level local governments in China is really existence,and there is obvious debt competition in general debt and government debt,but the competition behavior is not obvious when lending special debts.However,the influence of fiscal decentralization on the borrowing scale of provincial governments is not significant,and the parameters of fiscal decentralization have not passed the significance test.For municipal governments,whether it is general debt,special debt or government debt,inter-governmental debt competition will lead to further expansion of debt.Among them,the degree of competition between municipal government general debts is significantly higher than that of special debts.In addition,lower fiscal degrees of freedom will prompt municipal governments to compensate for the fiscal gap by expanding the size of the debt.From the perspective of the impact of debt competition on debt size,although both provincial and municipal governments have debt competition behavior,the degree of debt competition between provincial governments has a significantly higher impact on the scale of debt borrowing than municipal government.Finally,according to the research results of this paper,the following policy suggestions are put forward to solve the problem that the debt competition among local governments will stimulate the debt scale: 1.Establish a reasonable view of political achievements,and introduce the scale of government debt indicators into the evaluation mechanism of official promotion;2.Strengthen the management of government debt and limit the scale of general debts and special debt;3.Improve the fiscal decentralization system and establish a fiscal system in which financial rights and powers are matched.