Local Debts, Regional Disparity and Economic Growth: An Empirical Study Based on China's Prefecture-Level Data
MAO Jie, HUANG Chunyuan
School of International Trade and Economics, University of International Business and Economics; School of Public Finance and Taxation, Capital University of Economics and Business
Abstract:
Based on the typical facts and the theoretical analysis, using of prefecture data from 2004 to 2015, this paper examines the impact of local debts on the regional economic growth. The study found that: (1) Local debts have an inverse U effect on economic growth. When the level of debt does not break the balance of debt, the positive role of local debts will lead to economic growth (by making up for the lack of financial resources or improving infrastructure). Once the debt level exceeds the debt balance, the local debts will curb economic growth. The findings are consistent with those obtained from existing literature on transnational data. (2) Different from the existing research, we also found that local debts have obvious regional differences in the impact on economic growth. Compared to the economically developed eastern region, the debt balance of the Midwest and Northeast is low, and the scale of local debts continued expansion in these areas are more likely to have a negative effect on economic growth. Factors like level economic development, fiscal condition, industrial structure, level of real estate development and urban agglomeration can explain why the eastern region has a higher balance of debt. The findings of this study provide new empirical evidence for understanding China's local government debt problems and formulating relevant policies reasonably.
毛捷, 黄春元. 地方债务、区域差异与经济增长——基于中国地级市数据的验证[J]. 金融研究, 2018, 455(5): 1-19.
MAO Jie, HUANG Chunyuan. Local Debts, Regional Disparity and Economic Growth: An Empirical Study Based on China's Prefecture-Level Data. Journal of Financial Research, 2018, 455(5): 1-19.
Afonso, A. and J. T. Jalles, 2013, “Growth and Productivity: The Role of Government Debt”, International Review of Economics & Finance, Vol. 25(1), pp.384~407.
[22]
Checherita-Westphal, C. and P. Rother, 2012, “The Impact of High Government Debt on Economic Growth and Its Channels: An Empirical Investigation for the Euro Area”, European Economic Review, Vol. 56(7), pp.1392~1405.
[23]
Cochrane, J. H., 2011, “Understanding Policy in the Great Recession: Some Unpleasant Fiscal Arithmetic”, European Economic Review, Vol. 55(1), pp.2~30.
[24]
Eberhardt, M. and A. F. Presbitero, 2015, “Public Debt and Growth: Heterogeneity and Non-linearity”, Journal of International Economics, Vol. 97(1), pp.45~58.
[25]
Hansen, B. E., 1999, “Threshold Effects in Non-dynamic Panels: Estimation, Testing and Inference”, Journal of Econometrics, Vol. 93(2), pp.345~368.
[26]
Hansen, B. E., 2001, “The New Econometrics of Structural Change: Dating Breaks in U.S. Labor Productivity”, The Journal of Economic Perspectives, Vol. 15(4), pp.117~128.
[27]
Huang, Yi, M. Pagano, and U. Panizza, 2016, “Public Debt and Private Firm Funding: Evidence from Chinese Cities”, Centre for Studies in Economics and Finance (CSEF) Working Paper No. 450.
[28]
Lo, S. H. and K. Rogoff, 2015, “Secular Stagnation, Debt Overhang and Other Rationales for Sluggish Growth, Six Years on”, BIS Working Papers No. 482.
[29]
Reinhart, C. M. and K. S. Rogoff, 2010, “Growth in A Time of Debt”, American Economic Review, Vol. 100(2), pp.573~578.
[30]
Teles, V. K. and C. C. Mussolini, 2014, “Public Debt and the Limits of Fiscal Policy to Increase Economic Growth”, European Economic Review, Vol. 66(1), pp.1~15.
[31]
Wang, Q.Y., 2015, “Fixed-Effect Panel Threshold Model Using Stata”, Stata Journal, Vol. 15(1), pp.121~134.
[32]
Zwick, E. and J. Mahon, 2017, “Tax Policy and Heterogeneous Investment Behavior”, American Economic Review, Vol. 107(1), pp.217~248.
