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The impact of local government debt on urban environmental pollution and its mechanism: Evidence from China

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  • Zhenyu Qi
  • Siying Yang
  • Dawei Feng
  • Wenzhi Wang

Abstract

As an important financial means for governments to improve the quality of economic development, government debt greatly affects the quality of local environmental governance. Based on a theoretical mechanism analysis that uses the pollutant emissions panel data and new caliber urban investment bond data of 273 cities in China, this paper empirically tests the impact of local government debt on urban emission reduction and the mechanism that drives this impact. We find that local government debt significantly promotes urban emissions reduction, and as urban pollution becomes more aggravated, this promoting effect has a dynamic path, first strengthening and then weakening. The role of local government debt in promoting urban emission reduction is characterized by both temporal and spatial heterogeneity. A mechanistic analysis shows that local government debt can promote urban emission reduction by promoting urban environmental innovation, with green invention patents demonstrating a stronger intermediary role than green utility model patents.

Suggested Citation

  • Zhenyu Qi & Siying Yang & Dawei Feng & Wenzhi Wang, 2022. "The impact of local government debt on urban environmental pollution and its mechanism: Evidence from China," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-22, March.
    • Handle: RePEc:plo:pone00:0263796
    DOI: 10.1371/journal.pone.0263796
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    References listed on IDEAS

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    1. Eberhardt, Markus & Presbitero, Andrea F., 2015. "Public debt and growth: Heterogeneity and non-linearity," Journal of International Economics, Elsevier, vol. 97(1), pages 45-58.
    2. George E. Halkos & Epameinondas A. Paizanos, 2016. "Fiscal Policy and Economic Performance: A Review," Journal of Reviews on Global Economics, Lifescience Global, vol. 5, pages 1-15.
    3. López, Ramón & Galinato, Gregmar I. & Islam, Asif, 2011. "Fiscal spending and the environment: Theory and empirics," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 180-198, September.
    4. Halkos, George E. & Paizanos, Epameinondas Α., 2013. "The effect of government expenditure on the environment:An empirical investigation," Ecological Economics, Elsevier, vol. 91(C), pages 48-56.
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    Cited by:

    1. Zhang, Ke, 2023. "Government's implicit guarantee and the credit spread of the quasi-municipal bonds," Finance Research Letters, Elsevier, vol. 55(PA).
    2. Onuoha, Favour Chidinma & Dimnwobi, Stephen Kelechi & Okere, Kingsley Ikechukwu & Ekesiobi, Chukwunonso, 2023. "Funding the green transition: Governance quality, public debt, and renewable energy consumption in Sub-Saharan Africa," Utilities Policy, Elsevier, vol. 82(C).
    3. Okere, Kingsley Ikechukwu & Dimnwobi, Stephen Kelechi & Ekesiobi, Chukwunonso & Onuoha, Favour Chidinma, 2023. "Turning the tide on energy poverty in sub-Saharan Africa: Does public debt matter?," Energy, Elsevier, vol. 282(C).

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