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The impact of local government debt on economic resilience: Evidence from 283 cities in China

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  • Wang, Fei
  • Wang, Jieqiong
  • Liang, Zheming
  • Guo, Runqi

Abstract

Enhancing urban economic resilience and strengthening local government debt governance are both critical for sustainable regional development. Using panel data from 283 prefecture-level cities in China from 2011 to 2021, this study constructs a dynamic panel model to examine the impact of local government debt on economic resilience and to explore the underlying mechanisms. The results show that: (1) the expansion of local government debt significantly reduces urban economic resilience; (2) higher debt levels increase tax burdens, exacerbate resource misallocation, and crowd out private investment, thereby hindering improvements in economic resilience; and (3) the effects of local government debt exhibit significant regional heterogeneity. Specifically, the negative effect is more pronounced in regions with higher fiscal pressure and lower levels of financial development, whereas in regions with lower fiscal pressure and more developed financial markets, local government debt significantly enhances economic resilience. These findings provide important policy implications for optimizing local government debt governance and strengthening regional economic resilience.

Suggested Citation

  • Wang, Fei & Wang, Jieqiong & Liang, Zheming & Guo, Runqi, 2026. "The impact of local government debt on economic resilience: Evidence from 283 cities in China," Finance Research Letters, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:finlet:v:98:y:2026:i:c:s1544612326003703
    DOI: 10.1016/j.frl.2026.109840
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