IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v84y2024icp1185-1201.html
   My bibliography  Save this article

Does local government debt pressure hamper green transition? Evidence from China

Author

Listed:
  • Nie, Song
  • Zeng, Gang
  • Zhang, Xu
  • Guo, Qiaozhe

Abstract

The accumulated local government debt will change government fiscal behavior, which will further impact regional environment performance to a certain extent. However, the literature on how local government debt pressure (LGDP) affect green transition is scarce. By measuring the green transition by green total factor productivity (GTFP), we analyze the effect of LGDP on GTFP. We find that LGDP significantly reduces the GTFP. The negative effect acts through reducing green innovation and loosing environmental regulation. In addition, the negative impact will be more pronounced in cities with weak governance, development, and environmental protection efforts. Finally, enhancing marketization, lowering GDP growth target, and reducing tax burdens can alleviate the adverse effect of LGDP on GTFP. The conclusions of this study provide theoretical support for appropriate government debt governance and have important practical significance for green sustainable development in developing countries.

Suggested Citation

  • Nie, Song & Zeng, Gang & Zhang, Xu & Guo, Qiaozhe, 2024. "Does local government debt pressure hamper green transition? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1185-1201.
    • Handle: RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1185-1201
    DOI: 10.1016/j.eap.2024.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592624002613
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2024.10.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Liu, Zuankuo & Xin, Li, 2019. "Has China's Belt and Road Initiative promoted its green total factor productivity？——Evidence from primary provinces along the route," Energy Policy, Elsevier, vol. 129(C), pages 360-369.
    2. Yingying Zhou & Yaru Xu & Chuanzhe Liu & Zhuoqing Fang & Xinyue Fu & Mingzhao He, 2019. "The Threshold Effect of China’s Financial Development on Green Total Factor Productivity," Sustainability, MDPI, vol. 11(14), pages 1-23, July.
    3. Keen, Michael & Marchand, Maurice, 1997. "Fiscal competition and the pattern of public spending," Journal of Public Economics, Elsevier, vol. 66(1), pages 33-53, October.
    4. Li Li & Quanqi Liu & Jun Wang & Xuefei Hong, 2019. "Carbon Information Disclosure, Marketization, and Cost of Equity Financing," IJERPH, MDPI, vol. 16(1), pages 1-14, January.
    5. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
    6. Vighneswara Swamy, 2020. "Debt and growth: Decomposing the cause and effect relationship," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 141-156, April.
    7. Guotai Chi & Ying Zhou & Long Shen & Jian Xiong & Hongjia Yan, 2022. "Effect Of The Company Relationship Network On Default Prediction: Evidence From Chinese Listed Companies," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 25(06), pages 1-22, September.
    8. Andrea Caggese & Vicente Cunat, 2013. "Financing Constraints, Firm Dynamics, Export Decisions, and Aggregate Productivity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 177-193, January.
    9. Per Andersen & Niels Christian Petersen, 1993. "A Procedure for Ranking Efficient Units in Data Envelopment Analysis," Management Science, INFORMS, vol. 39(10), pages 1261-1264, October.
    10. Zhu, Junpeng & Lin, Boqiang, 2022. "Economic growth pressure and energy efficiency improvement: Empirical evidence from Chinese cities," Applied Energy, Elsevier, vol. 307(C).
    11. Pastor, Jesus T. & Lovell, C.A. Knox, 2005. "A global Malmquist productivity index," Economics Letters, Elsevier, vol. 88(2), pages 266-271, August.
    12. Jaejoon Woo & Manmohan S. Kumar, 2015. "Public Debt and Growth," Economica, London School of Economics and Political Science, vol. 82(328), pages 705-739, October.
    13. Li, Guangzhong & Li, Jie, 2018. "Managerial diversion, product market competition, and firm performance," China Economic Review, Elsevier, vol. 50(C), pages 240-264.
    14. Qu, Xi & Xu, Zhiwei & Yu, Jinxiang & Zhu, Jun, 2023. "Understanding local government debt in China: A regional competition perspective," Regional Science and Urban Economics, Elsevier, vol. 98(C).
    15. Xi Zhang & Rui Li & Jinglei Zhang, 2022. "Understanding the Green Total Factor Productivity of Manufacturing Industry in China: Analysis Based on the Super-SBM Model with Undesirable Outputs," Sustainability, MDPI, vol. 14(15), pages 1-16, July.
    16. Borge, Lars-Erik & Brueckner, Jan K. & Rattsø, Jorn, 2014. "Partial fiscal decentralization and demand responsiveness of the local public sector: Theory and evidence from Norway," Journal of Urban Economics, Elsevier, vol. 80(C), pages 153-163.
    17. Li, Sen & Qi, Tiancheng, 2023. "Fiscal decentralization, local government debt, and corporate innovation," Finance Research Letters, Elsevier, vol. 54(C).
    18. Wanping Yang & Zhenya Zhang & Yajuan Wang & Peidong Deng & Luyao Guo, 2022. "Impact of China’s Provincial Government Debt on Economic Growth and Sustainable Development," Sustainability, MDPI, vol. 14(3), pages 1-21, January.
    19. Xia, Fan & Xu, Jintao, 2020. "Green total factor productivity: A re-examination of quality of growth for provinces in China," China Economic Review, Elsevier, vol. 62(C).
    20. Ke Mao & Pierre Failler, 2022. "Local Government Debt and Green Total Factor Productivity—Empirical Evidence from Chinese Cities," IJERPH, MDPI, vol. 19(19), pages 1-13, September.
    21. Fan, Jianyong & Liu, Yu & Zhang, Qi & Zhao, Peng, 2022. "Does government debt impede firm innovation? Evidence from the rise of LGFVs in China," Journal of Banking & Finance, Elsevier, vol. 138(C).
    22. Leong, Chee Kian & Yang, Yung Chiang, 2020. "Market competition and firms' social performance," Economic Modelling, Elsevier, vol. 91(C), pages 601-612.
    23. Chen, Wen & Zhu, Yufeng & He, Zehui & Yang, Yang, 2022. "The effect of local government debt on green innovation: Evidence from Chinese listed companies," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    24. Junbing Xu & Yuanyuan Li & Dawei Feng & Zhouyi Wu & Yang He, 2021. "Crowding in or crowding out? How local government debt influences corporate innovation for China," PLOS ONE, Public Library of Science, vol. 16(11), pages 1-20, November.
    25. Zhao, Xin & Shang, Yuping & Song, Malin, 2020. "Industrial structure distortion and urban ecological efficiency from the perspective of green entrepreneurial ecosystems," Socio-Economic Planning Sciences, Elsevier, vol. 72(C).
    26. Arai, Real & Naito, Katsuyuki & Ono, Tetsuo, 2018. "Intergenerational policies, public debt, and economic growth: A politico-economic analysis," Journal of Public Economics, Elsevier, vol. 166(C), pages 39-52.
    27. Xinxin Zhao & Zongjun Wang & Min Deng, 2019. "Interest Rate Marketization, Financing Constraints and R&D Investments: Evidence from China," Sustainability, MDPI, vol. 11(8), pages 1-17, April.
    28. Nie, Song & Liu, Junxian & Zeng, Gang & You, Jiyuan, 2023. "Local government debt pressure and corporate ESG performance: Empirical evidence from China," Finance Research Letters, Elsevier, vol. 58(PB).
    29. Zhenyu Qi & Siying Yang & Dawei Feng & Wenzhi Wang, 2022. "The impact of local government debt on urban environmental pollution and its mechanism: Evidence from China," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-22, March.
    30. Li, Hongbin & Zhou, Li-An, 2005. "Political turnover and economic performance: the incentive role of personnel control in China," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1743-1762, September.
    31. Bowen Luo & Arshad Ahmad Khan & Adnan Safi & Jin Yu, 2023. "Research methods in economics to evaluate the role of energy efficiency and financial inclusion in achieving China’s carbon neutrality target," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(1), pages 1774-1802, March.
    32. Shiyi Chen & Wang Li, 2019. "Local government debt and regional economic growth in China," China Political Economy, Emerald Group Publishing Limited, vol. 2(2), pages 330-353, December.
    33. Junhong Bai & Jiayu Lu & Sijia Li, 2019. "Fiscal Pressure, Tax Competition and Environmental Pollution," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 431-447, June.
    34. Yuxin Zhu & Dazuo Tian & Feng Yan, 2020. "Effectiveness of Entropy Weight Method in Decision-Making," Mathematical Problems in Engineering, Hindawi, vol. 2020, pages 1-5, March.
    35. Tone, Kaoru, 2001. "A slacks-based measure of efficiency in data envelopment analysis," European Journal of Operational Research, Elsevier, vol. 130(3), pages 498-509, May.
    36. Yousha Liang & Kang Shi & Lisheng Wang & Juanyi Xu, 2017. "Local Government Debt and Firm Leverage: Evidence from China," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(2), pages 210-232, July.
    37. Zenglian Zhang & Wenju Zhao, 2018. "Research on Financial Pressure, Poverty Governance, and Environmental Pollution in China," Sustainability, MDPI, vol. 10(6), pages 1-24, June.
    38. Cochrane, John H., 2011. "Understanding policy in the great recession: Some unpleasant fiscal arithmetic," European Economic Review, Elsevier, vol. 55(1), pages 2-30, January.
    39. Baitong Li & Jian Li & Chen Liu & Xinyan Yao & Jingxuan Dong & Meijun Xia, 2023. "Provincial Inclusive Green Growth Efficiency in China: Spatial Correlation Network Investigation and Its Influence Factors," Land, MDPI, vol. 12(3), pages 1-24, March.
    40. Yao, Yining & Guo, Min & Jiang, Ping & Xu, Lei, 2024. "China's local government debt and firm tax burden," Pacific-Basin Finance Journal, Elsevier, vol. 87(C).
    41. Zhu, Jun & Xu, Haokun & Zhang, Yue, 2022. "Local government debt and firm productivity: Evidence from China," Research in International Business and Finance, Elsevier, vol. 63(C).
    42. Nie, Song, 2024. "Does intellectual property rights protection matter for low-carbon transition? The role of institutional incentives," Economic Modelling, Elsevier, vol. 140(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Geng, Xin & Qian, Meijun, 2024. "Understanding the local government debt in China," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    2. Ke Mao & Pierre Failler, 2022. "Local Government Debt and Green Total Factor Productivity—Empirical Evidence from Chinese Cities," IJERPH, MDPI, vol. 19(19), pages 1-13, September.
    3. Nie, Song & Zeng, Gang & Zhang, Hongying & Ji, Jianwen, 2024. "The local government fiscal pressure's effect on green total factor productivity: Exploring mechanisms from the perspective of government behavior," International Review of Economics & Finance, Elsevier, vol. 96(PC).
    4. Meiling Wang & Silu Pang & Ikram Hmani & Ilham Hmani & Cunfang Li & Zhengxia He, 2021. "Towards sustainable development: How does technological innovation drive the increase in green total factor productivity?," Sustainable Development, John Wiley & Sons, Ltd., vol. 29(1), pages 217-227, January.
    5. Ruomeng Zhou & Yunsheng Zhang, 2023. "Measurement of Urban Green Total Factor Productivity and Analysis of Its Temporal and Spatial Evolution in China," Sustainability, MDPI, vol. 15(12), pages 1-32, June.
    6. Xiong, Jiacai & Huang, Ling & Yang, Zelin & Wang, Xin, 2024. "The impact of local government debt on entrepreneurship: Evidence from a quasi-natural experiment of local debt governance reform," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 501-519.
    7. Hai Xie & Weikun Zhang & Hanyuan Liang, 2023. "Can Local Government Debt Decrease the Pollution Emission of Enterprises?—Evidence from China’s Industrial Enterprises," Sustainability, MDPI, vol. 15(11), pages 1-20, June.
    8. Yongquan Zhao & Ziwei Zhang, 2023. "Distribution of Spatial and Temporal Heterogeneity of Green Total-Factor Productivity in the Chinese Manufacturing Industry, and the Influencing Factors," Sustainability, MDPI, vol. 15(4), pages 1-15, February.
    9. Yuanlin Wu & Cunzhi Tian & Guannan Wang, 2023. "Local Government Debt and Corporate Investment Behavior in China: Real versus Financial Investment," Sustainability, MDPI, vol. 15(22), pages 1-22, November.
    10. Li, Anjie & Qiu, Junjie, 2024. "Does local government debt promote firm green innovation? Evidence from the Chinese local government debt governance reform," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1046-1062.
    11. Qingyan Zhu, 2023. "How Will the Relationship between Technological Innovation and Green Total Factor Productivity Change under the Influence of Service-Oriented Upgrading of Industrial Structure?," Sustainability, MDPI, vol. 15(6), pages 1-16, March.
    12. Xiong, Jiacai & Huang, Ling & Wang, Xin & Bai, Martin & Qin, Yafeng, 2024. "Local government fiscal stress and regional entrepreneurship: Evidence from a natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 177-193.
    13. Weixiang Zhao & Yankun Xu, 2022. "Public Expenditure and Green Total Factor Productivity: Evidence from Chinese Prefecture-Level Cities," IJERPH, MDPI, vol. 19(9), pages 1-27, May.
    14. Wang, Weilong & Wang, Jianlong & Wu, Haitao, 2024. "The impact of energy-consuming rights trading on green total factor productivity in the context of digital economy: Evidence from listed firms in China," Energy Economics, Elsevier, vol. 131(C).
    15. Ji, Qiang & Nie, Song, 2024. "How does local government fiscal pressure affect corporate ESG performance?," Finance Research Letters, Elsevier, vol. 64(C).
    16. Simone Salotti & Carmine Trecroci, 2012. "Even worse than you thought: The effects of government debt on investment and productivity," EcoMod2012 4200, EcoMod.
    17. Xiaoxu Zhang & Rongxue Jin, 2022. "Has local government debt crowded out enterprise innovation?," PLOS ONE, Public Library of Science, vol. 17(11), pages 1-17, November.
    18. Min Wang & Meng Ji & Xiaofen Wu & Kexin Deng & Xiaodong Jing, 2023. "Analysis on Evaluation and Spatial-Temporal Evolution of Port Cluster Eco-Efficiency: Case Study from the Yangtze River Delta in China," Sustainability, MDPI, vol. 15(10), pages 1-16, May.
    19. Huang, Hongyun & Wang, Fengrong & Song, Malin & Balezentis, Tomas & Streimikiene, Dalia, 2021. "Green innovations for sustainable development of China: Analysis based on the nested spatial panel models," Technology in Society, Elsevier, vol. 65(C).
    20. Liu, Yan & Wu, Guowei & Xiong, Chen, 2024. "Countercyclical central government transfers incentivize local government overborrowing: Theory and evidence," Economic Modelling, Elsevier, vol. 132(C).

    More about this item

    Keywords

    Local government debt pressure; Green transition; Green total factor productivity; Environment regulation; Green innovation;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1185-1201. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.