Spatial Interaction of Local Government Debt: Evidence from China

Ning Han, Huiyan Guo and Weitao Diao ()
Additional contact information
Ning Han: Business School, Qingdao University of Technology, Qingdao 266520, China
Huiyan Guo: Business School, Shandong Xiehe University, Jinan 250107, China
Weitao Diao: Business School, Qingdao University of Technology, Qingdao 266520, China

Sustainability, 2024, vol. 16, issue 8, 1-20

Abstract: The amount of local government debt has an important impact on the economic and social sustainability of a country. The rapid increase in local government debt in China over the past decade and the associated risks have profound implications for financial and economic sustainable development. While existing research has investigated governmental strategic interactions of tax and spending, little attention has been given to the spatial interaction of local government debt. This study employs Two-Regime Spatial Lag Models to investigate the spatial interaction of the debt among China’s 332 prefectural-level local governments over the period of 2015 to 2019. The findings show significant interaction effects between neighbouring governments, both in the acquisition and utilisation of debt quotas, and the interaction during the acquisition process is higher than that during the utilisation process. In addition, the interaction between neighbouring governments within the same province is more pronounced than that between governments adjacent but located in different provinces. Furthermore, the interaction of special debt is more manifest than that of general debt. These findings pass various robustness tests. Additionally, the mechanism test shows that fiscal competition is one of the driving forces behind the observed interdependence of local governments’ debt strategies.

Keywords: local government debt; China government debt; debt competition; fiscal competition; economic sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/16/8/3482/pdf (application/pdf)
https://www.mdpi.com/2071-1050/16/8/3482/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:16:y:2024:i:8:p:3482-:d:1380149

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().