The Impact Of Local Government Debt Financing Capacity On The Upgrading Of Regional Industrial Structure

With the advancement of China’s high-quality development tasks,the upgrading of industrial structure is increasingly becoming the key to development.In the process of upgrading regional industrial structure,the role of government is crucial.The construction of business environment and industrial chain support all require government financial support.However,there are many rigid requirements for local government financial expenditures,and a general study of local government financial resources can hardly reflect the autonomous role of local governments in the transformation of local industrial structure.Relatively speaking,local governments have a higher degree of autonomy over debt financing revenues,which to a certain extent reflects the degree of financial autonomy of local governments.Therefore,this paper starts from the perspective of local government debt financing capacity,which can more intuitively analyze the role played by local governments in industrial structure upgrading.Based on the above background,starting from the logic of industrial structure upgrading,this paper analyzes the influence mechanism of local government financing capacity on industrial structure upgrading from two levels: direct effect and indirect effect generated by local government debt financing and put forward the research hypothesis of this paper.To verify the research hypothesis,this paper selects a panel of prefecture-level cities from 2010 to 2021,uses two large local government debt management policy reforms in 2014 and 2017 as instrumental variables for empirical testing.Then this paper presents a mechanism analysis.Finally,regional heterogeneity is analyzed from multiple perspectives.Through theoretical and empirical analyses,this paper obtains the following main conclusions:(1)The local government debt financing capacity has a positive effect on the upgrading of regional industrial structure.(2)The local government debt financing capacity has the effect of promoting industrial structure upgrading by increasing local fixed asset investment.The effect of fixed-asset investment is "U" shaped,and the effect of fixed-asset investment is significantly positive in most prefectures.(3)The promotion effect of local government debt financing on industrial structure upgrading has regional heterogeneity.In terms of geographical location,local government debt financing can promote industrial upgrading in inland cities and northeastern regions,but has no significant effect on coastal and eastern regions,and has a negative effect on industrial structure in western regions instead.In terms of social development level,local government has a significant promotion effect on industrial upgrading in regions with lower GDP per capita,but has no specific effect on regions with higher GDP per capita.Based on these findings,this paper puts forward some suggestions:(1)The central government can further grant local governments the authority to raise debt moderately in accordance with the law;(2)When using debt financing funds for fix investment,local governments should optimize the industrial share of investment;(3)Western regions should pay attention to controlling the scale of debt financing,improving the efficiency of using debt funds,and making reasonable use of public-private partnership(PPP)mode.(4)Regions whose industrial structure is already at a better level,such as coastal regions and eastern regions,need to find another path.The main innovations are:(1)Most research focuses on the government’s influence on industrial structure through industrial policies,tax incentives,etc.This paper examines an alternative approach.Local governments use debt financing to enrich short-term financial resources as a way to improve the business environment and attract external investment,thereby upgrading their industrial structure.This is a new perspective and provides new ideas for research on the role of local governments in economic development;(2)This paper constructs data on local government debt of prefecture-level cities after the reform of local debt management system in 2014 and extends the sample period of local government debt data at prefecture-level cities from 2017 to 2021;(3)This paper utilizes two larger local government debt management policy reforms in 2014 and 2017 as instrumental variables,which better address the endogeneity issue and provide some reference for future related empirical studies.