Does Local Government Bond Regime Adjustment Affect Environmental Pollution? Evidence from China

Local government bonds in China have undergone various pilot reforms, providing a useful research perspective for analysing local government debt issues. We use the pilot reforms in 2011 and 2014 as two quasi-natural experiments that adjusted the regime of local government bonds. We examine the impact of local government regime adjustments on regional environmental pollution using the difference-in-differences method. The empirical results suggest that regime adjustments have exerted a substantial influence on government expenditure compositions, thereby influencing the degree of regional environmental pollution. Our paper extends the study of local government bonds and sheds light on their social impact.