The Impact of Haze Pollution on Chinese Local Government Debt

Abstract

Can haze pollution effectively influence local government debt? This study uses data from 285 Chinese cities at the prefecture level or above from 2006 to 2019, and uses annual average sunny days as an instrumental variable to systematically analyze the impact of haze pollution on local government debt from both theoretical and empirical perspectives. The main conclusions of this study are: (1) there is a positive correlation between haze pollution and local government debt; (2) sub-sample analysis suggests that the impact of haze pollution on local government debt shows heterogeneous effects in different cities and at different times; and (3) the analysis of the relevant mechanism suggests that haze pollution can promote local government debt through industrial structure upgrading and green technology innovation. The research conclusions provide policy references for Chinese local governments to effectively respond to haze pollution.