Summary:
According to data released by the National Statistical Bureau, by the end of June 2013, local government debt in China had reached 10.9 trillion yuan, with an average annual growth rate of 27.38% from 1997 to 2013. By the end of 2018, total local government debt in China was 18.39 trillion yuan. Compared with 2013, it had increased by about 68.71%. The growth rate of local government debt has greatly exceeded local economic growth. Local government debt can be understood as the result of inefficient expansion, which leads to the accumulation of debt risk. To promote high-quality economic development, it is important to continuously improve the use and input-output efficiency of debt. A scientific and systematic debt performance analysis of local governments indicates that promoting economic growth through the rational use of debt is essential. Doing so requires strengthening local government debt management and preventing local government debt risk. This paper makes several contributions to the literature. First, this paper integrates local government competition, local government debt behavior strategy, and local government debt performance into a unified analytical framework. In other words, it explains how local government competition affects local government debt performance through the interaction of debt behavior strategies in different regions. Second, because of competition and imitation among regions, neighboring regions are not independent economic entities. When devising local debt behavior strategy, local governments consider not only their own situation, but also the debt strategies of other regions. Therefore, this paper uses a spatial Durbin model to empirically test the effect and spatial spillover of local government competition on local government debt performance, and to analyze the influence mechanism from the perspective of soft budget constraint, providing a basis for optimizing local government debt performance from a spatial perspective. This paper offers a theoretical interpretation of how local government competition affects local government debt performance through the interaction of debt behavior strategies between regions. It finds that under the guise of maximizing the local government's utility, tax competition and public investment competition lead local governments to increase the scale of their debt. At the same time,local government competition leads to a lower debt output conversion rate with the continous and rapid growth of debt, which hinders the improvenment of local government debt performance. This paper conducts global super-efficiency data envelopment analysis to measure local government debt performance, and develops a spatial Durbin model to test the effect of local government competition on local government debt performance, and the path of this effect. It finds that both local government tax competition and public investment competition have a significant positive impact on the growth of local government debt and spatial spillover effect, leading local governments to take the initiative to expand their debt. However, local government tax competition and public investment competition have a negative impact on local government debt performance and a spatial spillover effect. We call this “diminishing returns to scale.” Furthermore, local government competition combined with soft budgetary constraints has a negative impact on local government debt performance. We call this “diminishing utilization efficiency.” We make a number of suggestions. First, the central authority should restrain the impluse of tax and investment competition,by regulating local preferential tax policies and strengthening investment project management.Second, the scale of local government debt should be strictly controlled; local government debt behavior strategies should be spatially optimized to reduce competition strategies and imitative debt behavior. Third, the central government should establish a cross-regional linkage mechanism of debt performance evaluation and bonus-penalty system.
洪源, 陈丽, 曹越. 地方竞争是否阻碍了地方政府债务绩效的提升？——理论框架及空间计量研究[J]. 金融研究, 2020, 478(4): 70-90.
HONG Yuan, CHEN Li, CAO Yue. Does Local Government Competition Hinder the Improvement of Local Government Debt Performance？. Journal of Financial Research, 2020, 478(4): 70-90.
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