Local Government Debt and Growth Convergence
53 Pages Posted: 1 Jul 2021
Date Written: June 19, 2021
Abstract
The link between public debt and growth has long been discussed. This paper evaluates the effect on growth convergence from local government debt using a panel data of 276 Chinese cities. Our results show that Chinese local government debt hike since 2008 had a robust positive effect on growth convergence. We also provide and test several suggestive mechanisms behind our findings. And we use a policy shock as an instrumental variable to show that our proposed relationship is causal.
Keywords: Local Government Debt, Growth Convergence, Chinese Local Government Debt Hike
JEL Classification: E62, H39, O10, O20
Suggested Citation: Suggested Citation