Local crowding out in China

Yi Huang, Marco Pagano and Ugo Panizza

No 632, CFS Working Paper Series from Center for Financial Studies (CFS)

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.

Keywords: investment; local public debt; crowding out; credit constraints; China (search for similar items in EconPapers)
JEL-codes: E22 H63 H74 L60 O16 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-cna, nep-fdg, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/206411/1/1680695185.pdf (application/pdf)

Related works:
Journal Article: Local Crowding‐Out in China (2020)
Working Paper: Local Crowding Out in China (2019)
Working Paper: Local Crowding Out in China (2019)
Working Paper: Local Crowding Out in China (2016)
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:zbw:cfswop:632

Access Statistics for this paper

More papers in CFS Working Paper Series from Center for Financial Studies (CFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().