Professor Minggui Yu, the Co-Director of the Base, won the "Wenlan Major Scientific Research Award" of Zhongnan University of Economics and Law for his collaborative paper "Local government debt financing, crowding-out effect, and labor employment in enterprises".

The main content of the results

In the critical period of economic slowdown and accelerated economic restructuring, affected by international trade protection and domestic and international factors such as the COVID-19 epidemic, China's employment situation is extremely severe. According to the latest statistics from the National Bureau of Statistics, in June 2023, the surveyed unemployment rate among urban youth aged 16-24 years old in China reached 21.3%, a record high in recent years. The Party Central Committee and the State Council have successively placed employment at the top of the "six stable" and "six guarantees" work, and have successively introduced a series of policies and measures to stabilize employment. The report of the 20th National Congress of the Communist Party of China points out that employment is the most basic people's livelihood. It is necessary to implement the employment priority strategy, strengthen the employment priority policy, improve the employment promotion mechanism, and promote high-quality and full employment. Therefore, this study contributes to providing theoretical basis and policy reference for promoting employment. Over the past 10 years or so, local government debt has been increasing, occupying more and more financial resources, which may lead to difficulties for enterprises to obtain financing, thereby weakening their ability and willingness to absorb employment. Previous studies on local government debt financing did not pay attention to the crowding-out effect of local government debt financing on employment. This article is the first paper to study this topic.

Specifically, this article uses A-share listed companies from 2007 to 2018 as samples to test the impact of local government debt financing on enterprise labor employment. The study found that local government debt financing significantly inhibits enterprise labor employment. Mechanism analysis shows that local government debt financing intensifies enterprise financing constraints and financialization, thereby inhibiting enterprise labor employment. Further tests found that the impact of local government debt financing on enterprise labor employment mainly exists in private enterprises, enterprises with large financing needs, and regions with lower financial development levels. The results also found that local government debt financing mainly inhibits enterprises from employing highly educated employees.

Innovation and theoretical value

First, this study provides new evidence on how financing constraints affect corporate labor employment from the perspective of local government debt financing. Existing research mainly examines the impact of financing constraints on corporate labor employment from the perspectives of financing friction, financial development, control structure, political connections, etc. However, few studies have investigated whether and how local government debt financing affects corporate labor employment. This study enriches and expands the literature on the impact of financing constraints on corporate labor employment from the perspective of local government debt financing.

Secondly, this study expands the research on the influencing factors of non-financial enterprises' financialization from the perspective of local government debt financing. Existing research mainly studies the economic consequences of non-financial enterprises' financialization from the perspectives of business risk, investment, and financial market stability. However, there are few studies on the government factors that affect non-financial enterprises' financialization. This study enriches and expands the literature on the influencing factors of non-financial enterprises' financialization from the perspective of local government debt financing.

Thirdly, this paper expands the microeconomic consequences of local government debt financing from the perspective of corporate labor employment. There are many literatures on the microeconomic consequences of local government debt financing, which mainly study the impact of local government debt financing on enterprises from the perspectives of bank loans, investment spending, cash flow sensitivity, corporate leverage, and corporate investment. However, few literatures have studied the impact of local government debt on corporate labor employment. This paper enriches and expands the research on the microeconomic consequences of local government debt financing from the perspective of corporate labor employment.

Academic impact and social benefits: after its publication, this article was downloaded by CNKI for more than 19871 times, cited 74 times, selected into the 2022 Top 10 Most Cited Economic Research, reported in detail by the WeChat official account Econometrics, shared by the "Bili Bili" video, and watched 4125 times in total.

Teacher Profile

Minggui Yu, Dean, professor and doctoral supervisor of School of Finance, Zhongnan University of Economics and Law, Co-director of Innovation and Talent Base for Digital Technology and Finance. He has been included in the new century excellent talents to support the Ministry of Education plans, presided over a number of national natural science fund project. He has published more than 70 papers in Economic Research Journal, the Journal of Management World, China Economics Quarterly, China Industrial Economics, Financial Research Journal, Economic Modelling and other journals, and many papers have been selected to the top of the list of highly cited papers. He is also  the editor of journals such as Accounting and Finance.

Previous review：Professor Minggui Yu, the Co-Director of the Base, has published a collaborative paper in Economic Research Journal