Heterogeneous Effects of Local Government Financing Channels on Industrial Structure: Evidence from Provincial-Level Panel Data in China

Liangkun Shi, Huanqi Wu and Hanfei Yang

No 3waq5_v1, SocArXiv from Center for Open Science

Abstract: Local government financing channels provide an essential perspective for understanding the investment decisions of local governments and their economic effects. In China, broadly defined local government debt includes two categories: statutory debt and the debt incurred by local government financial vehicles (LGFVs). This paper uses provincial-level panel data from 2016 to 2025, constructs a data-driven industrial structure index, and estimates a two-way fixed-effects model controlling for the overall debt scale. The empirical evidence suggests that the different financial channels on industrial structure are associated with different and opposing changes in industrial structure. When the debt composition shifts toward LGFV debts, the share of relatively high-productivity efficiency industries increases, particularly that of the tertiary sector. In contrast, when the debt composition shifts toward statutory debt, the share of relatively low-production efficiency industries increases, particularly that of the secondary sector. Therefore, the composition of local government debt, rather than its scale alone, is relevant to changes in regional industrial structure.

Date: 2026-09-23
New Economics Papers: this item is included in nep-cna, nep-fdg and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:3waq5_v1

DOI: 10.31235/osf.io/3waq5_v1

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