The Effect of Local Debt on Regional TFP Growth: Based on Inspection of the Groups with Different Financial Independence
- MIAO Xiaolin & ZHAO Yixin
- Yunnan University of Finance and Economics, 650221.
Based on different economic development modes, this paper constructs the response function of regional Total Factor Productivity (TFP) growth to local debt around debt scale control effect and debt resource allocation effect respectively, to get the optimal debt proportion. Further empirical tests show that: (1) Simply increasing the size of local debt is not conducive to the growth of regional TFP. The TFP growth effect of local debt relies significantly on the improvement of exogenous investment environment. (2) The increase of local debt restrains the promotion of per capita private capital to regional TFP growth, and has a certain crowding-out effect. The institutional incentive function of local debt is not obvious. (3) The higher the fiscal independence is, the more local debt depends on per capita private capital to promote regional TFP growth. Since 2014, the central government has strengthened the management of local debt, which is conducive to the allocation of local resources. (4) Through the threshold effect model, it is estimated that the threshold value of local debt is 7%, and the region with higher fiscal independence has relatively higher debt carrying capacity, with a debt threshold value of 16.3%. Our research shows that the scale management of local debt is very important to prevent debt risk, but in order to fundamentally defuse debt risk, we need to strengthen the management of local debt allocation, and the key is to give full play to the institutional incentive function of optimizing the allocation of debt promotion factors.
JEL：D24, H63, H72
- Local Debt, Total Factor Productivity, Fiscal Independence, Scale Control Effect, Resource Allocation Effect