Local Crowding Out in China

104 Pages Posted: 11 Aug 2016 Last revised: 27 Oct 2019

See all articles by Yi Huang

Yi Huang

Graduate Institute of International and CEPR

Marco Pagano

CSEF - University of Naples Federico II - Centre for Studies in Economics and Finance (CSEF); Einaudi Institute for Economics and Finance (EIEF); Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Ugo Panizza

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; CEPR

Multiple version iconThere are 3 versions of this paper

Date Written: October 25, 2019

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.

Keywords: investment, local public debt, crowding out, credit constraints, China

JEL Classification: E22, H63, H74, L60, O16

Suggested Citation

Huang, Yi and Pagano, Marco and Panizza, Ugo, Local Crowding Out in China (October 25, 2019). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2820682 or http://dx.doi.org/10.2139/ssrn.2820682

Yi Huang

Graduate Institute of International and CEPR ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Marco Pagano (Contact Author)

CSEF - University of Naples Federico II - Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Einaudi Institute for Economics and Finance (EIEF)

Via Sallustiana, 62
Rome, 00187
Italy

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

Ugo Panizza

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland

CEPR

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
964
Abstract Views
5,329
Rank
30,344
PlumX Metrics