The Impact Of Local Government Debt On Local Economic Growth

China’s local government bonds were born in the early days of the founding of the People’s Republic of China.In 1950,in order to speed up economic construction,Northeast China issued "northeast production and construction discount bonds",which is the earliest local government bonds in China.In 1958,China issued local production and construction bonds through legislation.Seven provinces participated in the issuance work,which played a good role in promoting the local economic and social development.After the reform and opening up,local governments need a lot of funds for various construction projects.After eight districts and counties borrowed local government debt in 1979,other regions of the country began to borrow debt one after another.After the 2008 economic crisis,in order to avoid the impact of the economic crisis,China implemented an economic stimulus plan of RMB 4trillion to promote the recovery of the national economy.Some of these funds need to be raised by local governments.In order to alleviate the pressure of local government funds,the State Council specially approved the issuance of 200 billion yuan of local government debt.Since then,the scale of local government debt has been expanding.At the same time,in recent years,whether local government debt can promote local economic development has become a hot issue for scholars.In this context,this paper combs and analyzes the literature on the impact of local government debt on economic growth.Using the panel data of 30 provinces and autonomous regions in China from 2012 to 2019,this paper uses spatial econometric model and threshold econometric model to study the impact of local government debt on local economic growth,and draws relevant conclusions: From the spatial effect analysis,the local government debt has a certain negative impact on the regional economic growth,and there is a significant spatial spillover effect.The negative impact will spill over to the neighboring provinces and hinder the economic development of the neighboring provinces.From the threshold effect analysis,the impact of local government debt on economic growth has threshold characteristics.There are two thresholds for the threshold variable of debt ratio.When the debt ratio is at a low level and less than the first threshold,debt can promote economic growth.When the debt ratio is in the middle level,its value is greater than the first threshold and less than the second threshold,debt can promote economic growth,Once the debt ratio is higher than the second threshold,the debt will hinder economic growth.In this paper,30 provinces in the sample are divided into high and low fiscal self-sufficiency regions according to the size of fiscal self-sufficiency rate,after the sub sample study,we found that: In areas with high financial self-sufficiency rate,the impact of local government debt on economic growth presents a single threshold feature,while in areas with low financial self-sufficiency rate,the impact of local government debt on economic growth presents a double threshold feature,indicating that the threshold effect of local government debt on local economic growth exists in regional heterogeneity.At the same time,taking Jiangsu Province,which has the largest scale of local government debt,as an example,this paper further studies the impact of local government debt of 13 prefecture level cities in Jiangsu Province on the city’s economic growth,so as to further test the robustness of debt spatial effect and threshold effect.