| In order to prevent and resolve the risk of implicit local government debt and maintain both financial and social stability,the need for an in-depth study of local government debt has come to the fore.Through the bridge of corporate financing constraint,there exists an indirect impact of local government debt-raising behavior on total factor productivity(TFP)of firms,thus relating to the overall situation of high-quality development of China’s economy.This paper focuses on the mechanism and effect of local government debt on the TFP of firms in China by constructing a mathematical model and an econometric model.In terms of the mathematical model,this paper designs a general equilibrium model based on general equilibrium theory,which is applicable to the current study.The model calibrates parameters based on realistic data of China to numerically simulate and analyze the problems raised in this paper.In addition,in order to explore the possible spillover effects of local government debt on TFP of firms,this paper also constructs an open economy model,a labor market heterogeneity model and a two-region model,and conducts corresponding extended research in labor market and regional economy.It is found that:(1)there are two different effects of government debt on corporate financing constraints: the crowding out effect and the growth effect.The crowding out effect tightens the financing constraint of firms,while the growth effect is the opposite.The average effect of government debt depends on the government’s decision on the use of debt funds and the efficiency of its use.(2)The impact of government debt on the financing constraints of firms determines the impact on the TFP of firms.The simulation results of the benchmark model show that if the use of debt funds is reasonably planned and regulated,the average effect of the current government debt is growth effect,and the relaxation of corporate financing constraints promotes the increase of firm-level TFP.(3)While local government debt affects the TFP of firms,it will have certain spillover effects on the labor market and economic development of trade exchange regions.For example,when government debt is manifested as growth effect,the increase in TFP of local firms will negatively affect the economic level of other regions through the commodity price gap.To verify the main research findings derived from the mathematical model simulations,this paper constructs an econometric model based on firm-level panel data to empirically investigate the average effect of local government debt on TFP of firms,and compares the results with the empirical study that adopted the data caliber of urban investment debt.The study finds that:(1)the average effect of local government debt formally included in the budget management on the TFP of firms turns out to be growth effect,indicating that local governments use the debt funds included in the budget management more efficiently and implement the management in place.The efficiency of the use of implicit debt such as urban investment debt is relatively low,and the impact of urban investment debt issuance on the firm-level TFP is mainly presented as crowding-out effect.(2)The significant impact of local government debt on TFP of firms exists in both the short and long term,while the impact of urban investment debt on TFP of firms exists mainly in the long term and is not significant in the short term.In the path of the impact of local government debt on firm-level TFP,there is a clearer mediating role of corporate financing constraints and corporate R&D investment.(3)Heterogeneity analysis shows that the growth effect of local government debt is mainly concentrated in state-owned enterprises,large enterprises and enterprises in more economically developed regions.The crowding-out effect of urban investment debt is mainly concentrated in non-state enterprises,small and medium-sized enterprises,and enterprises in less economically developed regions. |
