Collective Decision-making Power Structure and the Scale of Local Governments’ Implicit Debt: Based on the Perspective of the Standing Committee of Provincial Party Committees

Abstract

The impact of local “top leaders” on economic and social development and debt expansion has been supported by some studies, but the organizational principle of “collective leadership” within the Party and the impact of the actual power structure have not attracted enough attention. From the perspective of the collective decision-making structure of the standing committee of provincial Party committees, this paper divides the standing committee of provincial Party committees into three categories according to their origin: promoted from the local province, transferred from other provinces, and assigned from the central government, using the panel data of 30 provincial units from 2010 to 2018 to examine the impact of the collective decision-making power structure on the implicit debt of local governments. It provides a new perspective for studying the hidden debt risk of local governments and a reference for improving official governance and the modernization of national governance system.First of all, this paper uses the comprehensive FGLS and the dynamic panel regression model to study and finds that the standing committee members promoted from the local province have the incentive and ability to support the expansion of local governments’ debt, while the standing committee members transferred from other provinces or assigned from the central government have a lower tendency. Secondly, with the help of the mechanism identification of intermediary effect model, it is found that compared with the standing committee members transferred from other provinces or assigned from the central government, the standing committee members promoted from the local province have a stronger impact on financial resources, and the tendency to support the expansion of implicit debt in the local area has been verified. Further combined with the impact of fiscal pressure and economic growth pressure, we find that in the face of fiscal pressure and economic growth pressure, the attitude of the standing committee members transferred from other provinces or assigned from the central government loosens significantly, and the impact of economic growth pressure is more significant than that of financial pressure. We further introduce the personal characteristics of provincial Party secretaries and find that with the increase of the age and tenure of provincial Party secretaries, the pressure to seek promotion increases, and the tendency to tolerate the local implicit debt rises. However, the increase in education level can inhibit this tendency.The policy implication of this paper is that: To control the local implicit debt, we should not only reform the fiscal, tax and financial system and get rid of the debt-dependent development mode, but also seize the key minority of officials’ collective decision-making, continue to optimize the collective decision-making power structure and the accountability mechanism, and make joint efforts from the dual perspectives of system and official behavior to effectively resolve the risk of implicit debt.