Research on the Mechanism of Enhancing the Sustainable Development Capacity of Local Finance through Digital Economy

Abstract

As an important component of the national fiscal system,local finance is currently facing challenges such as intensified income and expenditure contradictions,prominent debt risks, and dependence on land finance.The digital economy provides new opportunities to enhance its sustainable development capabilities.This article takes panel data from 30 provinces in China from 2013 to 2023 as samples,and uses the entropy method to measure the level of digital economic development and the index of local fiscal sustainable development capacity.Through a two-way fixed effects model,mediation effect test,and robustness test,the relationship and mechanism between the two are explored.Research has found that the digital economy has a significant positive impact on the sustainable development capacity of local finance, which can be achieved through three paths:firstly,directly increasing fiscal revenue;The second is to indirectly empower through saving and optimizing fiscal expenditures;The third is to effectively reduce the debt burden of local governments.The robustness test further validated the reliability of the conclusion. Based on this,this article proposes the following suggestions:empowering high-quality development of local economy through digital transformation,creating a favorable tax policy environment for digital economy,strengthening inter regional exchanges and cooperation through digital economy,deepening the reform of fiscal management system through digital finance construction,and providing reference for resolving local fiscal difficulties and enhancing fiscal sustainable development capabilities.