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Local Crowding Out in China

Yi Huang, Marco Pagano () and Ugo Panizza
Additional contact information
Yi Huang: The Graduate Institute, Geneva, and CEPR

No 1707, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: In China, between 2006 and 2013 local public debt crowded out the investment of private firms by tightening their funding constraints, while leaving state-owned firms'investment unaffected. We establish this result using a purpose-built dataset for Chinese local public debt. Private firms invest less in cities with more public debt, the reduction in investment being larger for firms located farther from banks in other cities or more dependent on external funding. Moreover, in cities where public debt is high, private firms'investment is more sensitive to internal cash flow, also when cash-flow sensitivity is estimated jointly with the probability of being credit-constrained.

Pages: 83 pages
Date: 2017, Revised 2019-02
New Economics Papers: this item is included in nep-cna, nep-sbm, nep-tra and nep-ure
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Related works:
Journal Article: Local Crowding‐Out in China (2020) Downloads
Working Paper: Local Crowding Out in China (2019) Downloads
Working Paper: Local crowding out in China (2019) Downloads
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