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Appointing bankers as governors: Bureaucratic transfers and local government debt dynamics

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  • Zhang, Lu
  • Chen, Juejin
  • Wang, Yuan

Abstract

Political factors substantially influence the scale of public debt. To mitigate the vulnerability of local government debt, the Chinese central government dispatched experts to subnational state organs where they served as financial vice governors. This study uses data related to financial vice governors to empirically test the impact of bureaucratic transfers on implicit debt of local governments. The empirical results indicate that the growth rate of the implicit debt experienced an average increase of 9 % after the arrival of the financial vice governor. Regarding the impact mechanism, we attribute the growth in implicit debt to the ability of the financial vice governors to secure financial resources for local governments. Furthermore, our findings demonstrate that the degree of debt risk, marketization, and financial development collectively amplify the impact of the financial vice governor on implicit local government debts.

Suggested Citation

  • Zhang, Lu & Chen, Juejin & Wang, Yuan, 2024. "Appointing bankers as governors: Bureaucratic transfers and local government debt dynamics," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924004915
    DOI: 10.1016/j.irfa.2024.103559
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    More about this item

    Keywords

    Bank; Bureaucratic transfers; Government debt; Local government;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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