Research on Spatial Correlation Characteristics and Their Spatial Spillover Effect of Local Government Debt Risks in China

Xing Li, Xiangyu Ge, Wei Fan and Hao Zheng
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Xing Li: Economics and Management School, Wuhan University, Wuhan 430072, China
Xiangyu Ge: School of Statistics and Mathematics, Zhongnan University of Economics and Law, Wuhan 430073, China
Wei Fan: Economics and Management School, Wuhan University, Wuhan 430072, China
Hao Zheng: School of Statistics and Mathematics, Zhongnan University of Economics and Law, Wuhan 430073, China

Sustainability, 2021, vol. 13, issue 5, 1-32

Abstract: Scholars have proposed a series of methods, such as “sustainability of local government debt”, to measure local government debt risks. However, these methods have caused a lot of controversy. Based on a macro balance sheet, this study uses an improved “distance to distress” to measure China’s local government debt risks and applies a social network model to identify the spatial correlation characteristics, as well as the spillover effect. The results are as follows: (1) The data show multiple and heterogeneous spatial correlations for China’s local government debt risks; (2) there are some similarities between the subgroups and seven major geographic regions in China. The links among subgroups are randomly distributed and external; (3) the data manifest a “small world”, with a decreasing transitivity since 2014; (4) between these two significant factors, the positive impact of local government competition is more obvious than the division of powers and responsibilities; and (5) the spatial spillover effect of China’s local government debt risks results from the combination of local government competition, the division of powers and responsibilities, and local government intervention. This paper provides a scientific basis for obtaining a deeper understanding of China’s local government debt risks, and puts forward policy recommendations to strengthen China’s debt management.

Keywords: local government; debt risks; distance to distress; spatial correlation; spillover effect (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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