scholarly journals Crowding in or crowding out? How local government debt influences corporate innovation for China

PLoS ONE ◽  
2021 ◽  
Vol 16 (11) ◽  
pp. e0259452
Author(s):  
Junbing Xu ◽  
Yuanyuan Li ◽  
Dawei Feng ◽  
Zhouyi Wu ◽  
Yang He
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Market Competition ◽  
Government Debt ◽  
Crowding Out ◽  
Fiscal Policies ◽  
Corporate Innovation ◽  
Government Financing ◽  
Investment In China ◽  
D Investment

The pressure upon local governments to redeem their debt could affect government fiscal ability. It could consequently affect their fiscal policies on corporations, which might distort corporate innovation. Based on the data of Chinese Shanghai and Shenzhen A-share listed companies and the local government implicit short-term debt financed by local government financing vehicles (LGFVs) in 31 provinces, this paper shows that local government debt (LGD) negatively affects corporate R&D investment in China, thereby suggesting a strong crowding-out effect. The crowding-out effect is more pronounced when the firm is a non-state-owned enterprise (NSOE), the firm’s size is small, the firm’s age is young, or the firm is in the lower market competition. This paper provide evidence by interacting the terms that local government actions, such as consumption of fiscal resources, strengthening tax collection efforts, or consumption of credit resources, might partially account for the crowding-out effect. This study illustrates the innovation costs of local government debt.

Eurozonization of the Chinese Economy: How Do Intergovernmental Transfers Affect Local Government Debt in China?

2018 ◽  
Vol 17 (1) ◽  
pp. 1-18 ◽  
Author(s):  
Ming Lu ◽  
Huiyong Zhong
Keyword(s):  
Local Government ◽  
Government Debt ◽  
Chinese Economy ◽  
Fiscal Sustainability ◽  
Intergovernmental Transfers ◽  
Fiscal Transfers ◽  
Coastal Cities ◽  
Government Financing ◽  
Per Capita

China's local government debt has risen dramatically bringing risks to China's fiscal sustainability and long term economic growth. Using urban construction investment bonds (UCIBs) issued by local government financing vehicles (LGFVs), we study how intergovernmental fiscal transfers impact the issuance of UCIBs under China's unitary currency system. Applying instrumental variable estimation, we find that special-purpose fiscal transfers per capita are positively associated with the issuance of UCIBs. A one-RMB increase in special-purpose fiscal transfers per capita is associated with an increase in the issuance of UCIBs per capita of 0.282 RMB, whereas regular fiscal transfers (including tax rebates and general fiscal transfers) do not affect the issuance of UCIBs. Furthermore, the effect of special-purpose fiscal transfers on the issuance of UCIBs mainly exists in inland cities rather than coastal cities. This imposes risks of “eurozonization” for the Chinese economy. We also find a deterioration of refinancing in terms of issuing more UCIBs.

China to Curtail Local Government Debt

2016 ◽  
Vol 08 (04) ◽  
pp. 69-81
Author(s):  
Shuanglin LIN
Keyword(s):  
Local Government ◽  
Budget Deficit ◽  
Government Debt ◽  
Limit Set ◽  
Government Bond ◽  
The European Union ◽  
Government Budget ◽  
Upper Limit ◽  
Government Financing ◽  
Budget Revenue

In 2014, China’s total government debt was an estimated 60% of gross domestic product (GDP), close to the upper limit set by the European Union. The Xi administration has set budget deficit at 3% of GDP for 2016 and announced that government budget revenue will grow only 3.2% in 2016! It has also recently abolished local government financing vehicles, legalised local government bond issuing in 2014 and started "the debt swap" reform.

Pensions in the Trenches: How Pension Spending Is Affecting U.S. Local Government

2020 ◽  
pp. 107808742096486
Author(s):  
Sarah F. Anzia
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Significant Variation ◽  
The Political ◽  
Political Environment ◽  
Crowding Out ◽  
Government Services ◽  
Almost Everywhere ◽  
Key Features

Some experts claim that U.S. local governments are experiencing dramatic increases in pension expenditures and that pension spending is crowding out government services. Others maintain that serious pension problems are limited. This issue is important to political scientists, urban scholars, and policy practitioners, but no existing studies—nor the datasets they rely on—allow evaluation of whether pension expenditures are rising or how they are affecting local government. This article analyzes a new dataset of the annual pension expenditures of over 400 municipalities and counties from 2005 to 2016. I find that pension expenditures rose almost everywhere over this period, but there is significant variation in that growth. On average, local governments are not responding to rising pension spending by increasing revenue. They are instead shrinking their workforces. Moreover, I find that the magnitude of the employment reductions due to pensions varies with key features of the political environment.

scholarly journals Local Government Debt and Municipal Bonds in China: Problems and a Framework of Rules

2014 ◽  
Vol 31 (2) ◽  
pp. 23-53 ◽  
Author(s):  
Xingyuan Feng
Keyword(s):  
Public Finance ◽  
Local Government ◽  
Local Governments ◽  
Government Debt ◽  
Debt Financing ◽  
Municipal Bonds ◽  
Local Democracy ◽  
Government Bonds ◽  
Fiscal Transparency ◽  
Current State

Local governments in China are facing heavy debt burdens, a low level of fiscal transparency and a lack of constraints by local democracy. Since 2008, local government debts have skyrocketed. This article analyses the current state and features of local government debts and the two kinds of 'quasi municipal bonds' in China—urban investment bonds and local government bonds—along with their problems and risks. It examines the risks connected with local government debts and these bonds from the perspectives of public finance and political economy. It concludes with a discussion of a framework of rules for local government debt financing, especially for the issuance of municipal bonds in China.

scholarly journals Local Government Debt, Financing Platform and Fiscal Risk

2019 ◽  
Vol 12 (3) ◽  
pp. 40
Author(s):  
Wang Ying ◽  
Pan Wenjie
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Central Government ◽  
Government Debt ◽  
Debt Financing ◽  
Financial Risks ◽  
Measurement Models ◽  
Fiscal Risk ◽  
Default Risks

The excessive expansion of local financing platform as a substantive medium for local government borrowing has aggravated local government financial risks, which may induce systemic financial risks. Based on the current debt situation of the central and provincial governments, this paper uses different measurement models to calculate debt balance and default risks of the financing platforms. The results show that nearly one-third of the provinces may have potential financial risks, therefore the central government and local governments should work together and keep four kinds of balances in order to prevent and defuse risks.

scholarly journals What Motivates Internet Financial Reporting in the Public Sector? Case of a Local Government in Indonesia

2020 ◽  
Vol 3 (2) ◽  
pp. 102-116
Author(s):  
Dhita Aira Juniantika ◽  
Dini Wahjoe Hapsari
Keyword(s):  
Local Government ◽  
Financial Reporting ◽  
Local Governments ◽  
Government Debt ◽  
West Java ◽  
City Governments ◽  
Audit Opinion ◽  
Panel Data Regression ◽  
Audit Opinions ◽  
Debt Levels

Objective – This study aims to examine the influence of local government wealth, local government debt levels, and audit opinions on Internet Financial Reporting (IFR) in districts / cities in West Java Province, Indonesia, during the period of 2014-2018. Design/methodology – This study uses panel data regression analysis. Purposive sampling method is utilized with a total of 65 samples consisting of 13 official sites of district/city governments in West Java Province, Indonesia. The period of this research in total is five years. Results – The results of this study indicate that wealth of local governments, local government debt levels, and audit opinions simultaneously influence IFR at 9.81%. Partially the variable of local government wealth and the debt level of local government do not affect IFR, while the audit opinion variable influences IFR in districts/cities in West Java Province during 2014-2018.

scholarly journals Clustering Analysis of Risk Divergence of China Government’s Debts

2021 ◽  
Vol 2021 ◽  
pp. 1-9
Author(s):  
Tianhao Ouyang ◽  
Xiaoyong Lu
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Clustering Algorithm ◽  
Central Government ◽  
Debt Crisis ◽  
Government Debt ◽  
Growth Data ◽  
Difficult Time ◽  
The Government ◽  
The Impact

It is a difficult time for the world’s economics while the impact of COVID-19 is undergoing. A possible worldwide sovereign debt crisis could emerge, in short term, for supply chains blockage due to its slowing-down in many countries. China, having the second largest economy in the world, is crucial for the stability and sustainability of the economic recovery. China endures a long-term growth since 2000; nevertheless, a large amount of that growth is contributed by the government debt, which was spent on infrastructures. The accumulation of debts is a potential risk to the future growth of China. This research evaluates the central government and local government debts with a series of indicators. The weights of indicators are determined by objective methods of the CRITIC approach. Results confirm that the central government debt of China is on the edge of risk, while the risk of local governments debt is already in a concerning danger. The local government risk is 50% higher than the central government’s risk. Moreover, the K-means clustering algorithm performed on data, collected from various provinces, suggests that the local government debts of China follow a pattern of geographical distribution; that is, the closer to the coast, the lesser the risk, which is in accordance with the pattern of labor flowing. Labors are attracted by job opportunities which lie in the well-developed regions of China. This is confirmed by the crosscheck with the wage growth data. This indicates that the less developed areas of China rely more heavily on debt-investment stimulation that could be of a potential stagnation because the yield of investment follows diminishing marginal returns and the relative lacking labor weakens the potential economic growth.

Does the size of local government debt affect the level of debt of off-budget entities? The case of local government in Korea

2018 ◽  
Vol 86 (2) ◽  
pp. 333-348
Author(s):  
Seong-ho Jeong
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Government Debt ◽  
Debt Management ◽  
Public Enterprise ◽  
Accounting System ◽  
Public Enterprises ◽  
Debt Level ◽  
Panel Regressions ◽  
Metropolitan Cities

The rapid growth of debt of off-budget entities is the result of budgetary constraints. When local governments face fiscal stress, with rising debt, they tend to rely on local public enterprise debt to minimize debt limits and budgetary constraints. This study tests how the debt level of local governments affects the debt level of off-budget entities in 16 Korean metropolitan cities and provinces from 2008 to 2013, applying panel regressions. The results assert that as the debt of a local government increases, public enterprise debt increases accordingly. The findings confirm that public enterprises are used to lessen budget pressure by increasing the total public debt. This practice is like concealing local government debt by using off-budget entities, which eventually creates a fiscal illusion. Points for practitioners Off-budget entities are tools for bigger government and larger debt, so it is necessary to control the use of off-budget debt by imposing ceilings on the off-budget debt limit. From a comprehensive debt management perspective, off-budget entities should be used less to pursue government projects. Additionally, a segmented accounting system should be introduced within the off-budget entities.

Fiscal Decentralisation and Local Government Financing in Montenegro from 2002 to 2015

2016 ◽  
Vol 14 (3) ◽  
pp. 431-450 ◽  
Author(s):  
Sanja Kmezić ◽  
Jadranka Kaluđerović ◽  
Mijat Jocović ◽  
Katarina Đulić
Keyword(s):  
Local Government ◽  
Economic Crisis ◽  
Local Governments ◽  
Local Economic Development ◽  
Second Phase ◽  
Fiscal Impact ◽  
Fiscal Autonomy ◽  
Government Financing ◽  
Fiscal Decentralisation ◽  
The Republic

This article examines the fiscal decentralisation process and local government financing in Montenegro from 2002 to 2015 by focusing on the key legislative changes that occurred during the period under observation, as well as on the fiscal impact these changes and the economic crisis have had on municipal budgets. The analysis identifies two distinct phases of municipal financing in Montenegro. In the first phase (2003-2008), the Republic adopted legislation that strengthened the role and fiscal autonomy of local governments. During the second phase (2008-2015), several of the national government’s centralistic policies came into force. Together with the effects of the economic crisis, they deteriorated both local public finance and macroeconomic stability and hindered local economic development.

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