Dynamic Analysis of Endogenous Growth Models with Fiscal Decentralization and Local Government Debt

Abstract

The government debt issues have received extensive attention around the world. Basing on endogenous growth theory, this study uses the Hamilton function method to obtain the explicit solution of fiscal revenue decentralization, fiscal expenditure decentralization, and local government debt. Through partial derivative, our findings demonstrate the following: fiscal revenue decentralization has a negative effect on local government debt; fiscal expenditure decentralization has a positive effect on local government debt. Finally, policies and recommendations are proposed.