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Does local government debt pressure hamper green transition? Evidence from China

Author

Listed:
  • Nie, Song
  • Zeng, Gang
  • Zhang, Xu
  • Guo, Qiaozhe

Abstract

The accumulated local government debt will change government fiscal behavior, which will further impact regional environment performance to a certain extent. However, the literature on how local government debt pressure (LGDP) affect green transition is scarce. By measuring the green transition by green total factor productivity (GTFP), we analyze the effect of LGDP on GTFP. We find that LGDP significantly reduces the GTFP. The negative effect acts through reducing green innovation and loosing environmental regulation. In addition, the negative impact will be more pronounced in cities with weak governance, development, and environmental protection efforts. Finally, enhancing marketization, lowering GDP growth target, and reducing tax burdens can alleviate the adverse effect of LGDP on GTFP. The conclusions of this study provide theoretical support for appropriate government debt governance and have important practical significance for green sustainable development in developing countries.

Suggested Citation

  • Nie, Song & Zeng, Gang & Zhang, Xu & Guo, Qiaozhe, 2024. "Does local government debt pressure hamper green transition? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1185-1201.
    • Handle: RePEc:eee:ecanpo:v:84:y:2024:i:c:p:1185-1201
    DOI: 10.1016/j.eap.2024.10.006
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    Keywords

    Local government debt pressure; Green transition; Green total factor productivity; Environment regulation; Green innovation;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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