Promotion Incentive,Official Tenure And Local Government Debt

One of the main reasons for the rapid economic growth comes from the powerful promotion incentive of officials as political individuals.After the reform of tax sharing system,fiscal decentralization gives local governments greater financial autonomy,so local governments play a greater role in regional economic development.However,this expansion of fiscal autonomy has also led to market distortions.Local officials have more power than ever before to influence the market through government decisions,such as investing a larger proportion of fiscal expenditure on projects that can increase their promotion opportunities.This kind of promotion incentive promotes local officials to actively expand government expenditure,especially the investment in economic development,thus resulting in the mismatch between local financial power and administrative power.In order to make up for the gap of fiscal revenue and expenditure,local governments need to seek extra budgetary sources of funds.In the case of tax rigidity,government debt expenditure is a more flexible means of financial financing.The old budget law restricted the local government to issue debt,and financing platform began to be a new way of government debt financing.In order to cope with the global financial crisis,the local government has launched a plan to raise about $2.0 trillion of investment in response to the global financial crisis.During this period,the government debt increased rapidly and accumulated a lot,and the debt risk caused by it can not be ignored.Although in 2014,China Re restricted the financing platform and promoted the transformation of local government financing mode to issuing bonds.However,new forms of financing,such as PPP,are becoming popular again.The scale of implicit debt is not controlled,but is accelerating.Therefore,it is more important to clarify the underlying micro mechanism and how to affect the debt risk.This kind of promotion incentive for officials to obtain promotion comes from many factors,such as age,political background,education background and so on.Starting from the term of office of officials,this paper explores how this upper system factor shapes the promotion incentive of officials and then affects the choice of local government debt expenditure.In order to answer the above questions,this article mainly explores and analyzes the theory and empirical aspects.At the theoretical level,an official promotion model based on career considerations is constructed and expanded to include a political cycle model of debt financing.It provides a specific theoretical framework for analyzing the formation of government debt from the official level.In the empirical part,this paper selects the relevant data on the tenure of prefecture-level city officials and the scale of urban investment bonds from 2007 to 2015,and constructs a promotion incentive index to conduct empirical analysis and verify the above results.The conclusions are as follows:①When faced with promotion and assessment,local officials are more motivated to demonstrate their abilities.The performance is as follows:During the evaluation period,local officials usually take the initiative to reduce rent grabbing or expand the scale of debt to expand the source of expenditure;and after being promoted,they seek the maximum rent and reduce the scale of debt.Empirical level local governments represented by urban investment bonds There is a significant positive correlation between debt and promotion incentives(2)The performance of officials will be improved before the assessment in order to strive for greater opportunities for promotion.As a result,officials will improve social welfare in accordance with the central government’s assessment "baton".From the perspective of system design,the higher the frequency of such assessments,the better the overall social welfare.This is reflected in the data.Under certain circumstances,the longer the municipal party committee secretary’s tenure,the debt issuance scale will continue to decrease.③Promotion will follow.The higher the exogenous income,the greater the fluctuation of the overall level of officials,and the higher the level of local government debt expenditures for officials who performed better in the previous period.In addition,officials with less fiscal revenue at their disposal will also rely more on debt financing instruments.Combining the above conclusions,this article gives the following suggestions:expand the scope of political performance evaluation,reform the government accounting system,combine economic evaluation with debt evaluation,and implement policies based on local conditions.