On the Expansion Root of Local Government Debt Scale From the Perspective of Tax Competition

LIU Qing-jie; REN De-xiao

Volume 37 Issue 2

Mar. 2022

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LIU Qing-jie, REN De-xiao. On the Expansion Root of Local Government Debt Scale From the Perspective of Tax Competition[J]. Journal of Guangdong University of Finance & Economics, 2022, 37(2): 56-70.

Citation:

LIU Qing-jie, REN De-xiao. On the Expansion Root of Local Government Debt Scale From the Perspective of Tax Competition[J]. Journal of Guangdong University of Finance & Economics, 2022, 37(2): 56-70.

LIU Qing-jie, REN De-xiao. On the Expansion Root of Local Government Debt Scale From the Perspective of Tax Competition[J]. Journal of Guangdong University of Finance & Economics, 2022, 37(2): 56-70.

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On the Expansion Root of Local Government Debt Scale From the Perspective of Tax Competition

LIU Qing-jie¹,
REN De-xiao^2
,

1.
Belt and Road School, Beijing Normal University, Zhuhai 519087
2.
School of Management, Guangzhou College of Technology and Business, Guangzhou 510850, China

Received Date: 2021-10-26
Available Online: 2022-04-24
Publish Date: 2022-03-28

Abstract

Abstract

The scale expansion of local government debt in China presents the characteristics of spatial linkage, and the tax competition stimulated by fiscal decentralization and political promotion tournament has become the endogenous driving force of local government borrowing. Under the background of the promulgation of the new Budget Law in 2014, dividing local government debt into government debt that is included in budget management and implicit government debt (urban investment debt), this paper builds a debt spatial correlation model and a tax competition influence model, and explores the spatial correlation of the scale expansion of the two kinds of government debt and their heterogeneity characteristics influenced by tax competition. It is found that the scale expansion of government bonds and urban investment bonds is characterized with significant spatial linkage growth, but the spatial correlation of urban investment bonds is more significant; tax competition has significantly stimulated the expansion of government debt scale, with the scale of urban investment bonds growing faster and the response coefficient higher; the improvement of economic development level is conducive to alleviating the stimulating effect of tax competition on debt growth, while economically underdeveloped areas are more likely to "get into debt due to competition". The implementation of the series of debt regulation policies in 2014 reduced the spatial linkage of regional debt scale expansion, but increased the elasticity coefficient of urban investment bonds to tax competition. When the local government debt brought into budget management is constantly regulated, and faced with the financial pressure brought by tax competition, local governments may tend to seek debt resources from more hidden investment and financing platforms, which has stimulated the rapid expansion of urban investment bonds. After replacing the measurement method of tax competition proxy variables, the above conclusions are still robust. This study suggests that local government debt risks should be prevented and resolved from a global perspective; the performance evaluation system of local governments should be improved and optimized, and explicit and implicit debts of local governments should be considered to realize the market-oriented transformation of financing platform companies as soon as possible.
- government bond,
- implicit debt,
- urban investment bond,
- tax competition,
- New Budget Law,
- debt scale,
- local government

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References(40)

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