A Study Of The Impact Of Debt Budget Constraints On Local Government Debt Performance

On January 1,2015,the newly revised Budget Law was implemented nationwide.The revised policy emphasizes the regulation of government revenue and expenditure behavior,specifying that local government borrowing at the provincial level can only rely on the form of public bond issuance,while emphasizing that explicit local government debt must be included in budget management in accordance with the requirements.With the introduction of the new policy,the previous situation of local government debt running outside the budget has been changed,and a large part of the debt raised in the local financing platform in the past has been transformed into local government explicit debt,and subdivided into general debt and special debt,and included in the full-caliber budget management.Under this regulation,the previous soft constraint management of all local government debts is transformed into a part of hard budget constraint.In this paper,we use the new local government debt management policy implemented in2015 after the implementation of the Budget Law as a quasi-natural experiment to capture the exogenous changes in debt budget constraints at the prefecture-level city level with the help of the new local government debt management policy implemented in 2015,and analyze the panel data of 249 cities from 2009-2019 using the intensity double difference method to empirically examine the impact of local government debt budget constraints on local government debt performance.The findings are as follows:(1)The results of the benchmark regression indicate that stronger debt budget constraints can have a more significant positive enhancement effect on local government debt performance.Meanwhile,the results remain robust after the regressions are conducted using parallel trend tests and robustness tests.(2)The results of mechanism analysis show that strengthening the debt budget constraint can reduce the weighted average interest rate of debt,reduce the amount of audit irregularities and land concession revenue,and improve the efficiency of capital allocation,which can enhance the local government debt performance through three paths of economy,effectiveness and efficiency.(3)The results of heterogeneity analysis show that for the eastern regions with a higher level of economic development and a certain foundation of reform experience,the local government debt performance is not significantly enhanced after the debt budget constraint is strengthened and is not significantly influenced by the policy;the enhancement effect of the degree of budget constraint of special debt on the local government debt performance is greater than that of general debt,but the difference is not prominent;the debt budget constraint in low debt ratio regions The effect of enhancing the budgetary constraints on local government debt performance is greater in low-indebtedness areas than in high-indebtedness areas.Finally,this paper puts forward corresponding policy recommendations in three aspects: deepening fiscal system reform,strengthening local debt scale management and improving local debt budget management in response to the research findings.