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Rising government debt on the path of going green in China

Published online by Cambridge University Press:  27 November 2024

Haoyang Li ,
Yuqin Wang ,
Guohan Yang  and
Tongbin Zhang
Haoyang Li
Affiliation:
College of Economics and Management, Nanjing Agricultural University, Nanjing, China
Yuqin Wang
Affiliation:
School of Economics, Shanghai University of Finance and Economics, Shanghai, China Key Laboratory of Mathematical Economics (SUFE), Ministry of Education, China
Guohan Yang
Affiliation:
JT Asset Management Co. Ltd., Beijing, China
Tongbin Zhang*
Affiliation:
School of Economics, Shanghai University of Finance and Economics, Shanghai, China Key Laboratory of Mathematical Economics (SUFE), Ministry of Education, China
*
Corresponding author: Tongbin Zhang; Email: tongbin.zhang.econ@gmail.com
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Abstract

In this study, we examine how local government debt responds to environmental policies in China. We show that when an environmental policy impacts the economy, local governments are likely to increase debt issuance, with this effect becoming stronger when local officials have greater career incentives within the Chinese bureaucratic system. Over-accumulation of local government debt, which leads to social welfare losses, is closely tied to the urgency local officials feel to secure promotions. Our analysis offers valuable insights for better coordination between fiscal and environmental policies.

Keywords

government debtenvironmental policyeconomic fluctuationsE32E62H74P16Q58
Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e61
Copyright
© The Author(s), 2024. Published by Cambridge University Press

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