Local Debt and Social Welfare in China: Evidence from Zhejiang and Anhui

Abstract

Currently local government debt is a major concern for all sectors of society, but there is still a debate about the relationship between local government debt and social welfare. This paper addresses the question of the impact of local debt and social welfare in China, using a case study of data from Zhejiang and Anhui from 2014-2019 to qualitatively analyze the impact of local debt and social welfare in four dimensions: consumption, infrastructure, education, and health. The results found that: first, the growth of local debt has an inverted U-shaped impact on residents' welfare, which is manifested in the fact that before the size of local debt reaches the critical value, the increase of local debt can enhance social welfare, but after exceeding the critical value, the increase of local debt makes social welfare decline; second, in terms of sub-welfare index factors, there are different correlation degrees between different factors and the indicators of local debt, and thus have different characteristics of development at different stages are characterized by different developments.