Does the expansion of local government debt affect the export quality?

Abstract

Improving the quality of its exports is an important way for China to develop high-quality foreign trade. It is of greatest academic value and policy significance to study the factors that restrict the export quality of enterprises. This paper empirically discusses the impact of local government debt expansion on export quality as well as its transmission mechanism, using microdata from Chinese enterprises. According to research findings, the acquisition of debt negatively affects enterprises in several ways. First, the expansion of local government debt has a negative impact on the export quality of enterprises. Second, local government debt affects export quality through financial constraints and the Dutch disease effect. Third, local government debt impact on export quality reflects significant heterogeneity in terms of debt types and characteristics of regional economics.