Do high-speed rail (HSR) station and airport affect local government debt risk? Evidence from China

Abstract

This study examines the differential impact of HSR station and airport on local debt risk during the construction and operation stage. Based on the data of China's prefecture-level cities from 2010 to 2019, Feasible Generalized Least Square (FGLS) model results show that HSR station under construction reduces local debt risk by attracting extra-municipal capital inflows. However, the more HSR stations and airports are opened, the more local governments invest in other infrastructure, leading to increased local debt risk. By dynamic test, it is found that the longer the opening time, the greater the difference between the positive impact of HSR stations and airports on debt risk. Further synergies suggest that both local governments and investors have high expectations for urban development driven by HSR stations rather than airports, and the presence of HSR station amplifies the positive external effects of the airport construction. These findings not only deepen the understanding of the risk impact of HSR station and airport, but also provide enlightenment for countries to develop HSR station and airport through debt.