Research On The Impact Of Expanding Local Government Debt On The Domestic Value-Added Rate

China has been deeply involved in the international division of labor,but the division of labor status is not high,often in the low-end manufacturing link,and enterprises export a low domestic value-added rate.Due to the special system,China’s government plays an important role in society,and in recent years,large-scale debt raising by local governments has had an impact on enterprises.Local governments will exert influence on the domestic value-added rate through two paths: financing to acquire debt and spending debt funds,thus having two sides.The existing studies on the mechanism of the impact of local government debt on the domestic value-added rate have not been clarified.Therefore,it is very important to explore the comprehensive impact of local government debt on the domestic value-added rate.This paper mainly analyzes the intrinsic mechanism of local government debt affecting the domestic value-added rate at the theoretical level,and on this basis,matching the data from China Industrial Enterprise Database and China Customs Trade Database from 2004 to 2013,we adopt a fixed-effects model to test the effect of local government debt on the domestic value-added rate.The robustness of regression results is tested by replacing core explanatory variables,lagging one period,narrowing the sample size,and endogeneity.Based on this,using enterprise financing cost,intermediate goods price,enterprise innovation level and industry cluster to test the influence mechanism among them,and further distinguish between regions with different debt-to-fiscal revenue ratios,different economic levels,different trade modes and different marketization processes to analyze the heterogeneity.The empirical results find that: Firstly,local government debt has a positive contribution to the domestic value-added rate in general.But the contribution will no longer exist when the debt size is higher than fiscal revenue.Secondly,Local government financing reduces the domestic value-added rate through the cost-raising effect,and local government expenditure increases the domestic value-added rate through the innovation incentive effect and industrial agglomeration effect.Thirdly,the positive effect of local government debt on the domestic value-added rate is more significant in less economically developed regions.Fourthly,local government debt has a more significant positive impact on the domestic value-added rate of processing trade enterprises,a more significant negative impact on the domestic value-added rate of general trade enterprises.Fifthly,local government debt can have a negative impact on the domestic value-added rate of export of enterprises in regions lagging behind in the marketization process.Based on the above findings,it is proposed that firstly,local governments debt issuance behavior should be regulated and debt information should be disclosed regularly.Secondly,resource reallocation should be promoted and budget control should be strengthened.Thirdly enterprises should pay attention to innovation and improve their core competitiveness.