Crossing administrative boundaries: Using internet development to improve borrowing size

Abstract

Borrowing size plays a crucial role in promoting urban economic development. In theory, administrative boundaries pose obstacles to borrowing size due to the border effect. However, internet development mitigates the adverse impact of administrative boundaries on borrowing size due to the cross-border effect. To verify the above argument, this paper empirically tests the impact of administrative boundaries and internet development on borrowing size based on the panel data of 214 cities in 14 urban agglomerations in China from 2008 to 2019. The results confirm that the internet development has indeed produced a cross-border effect. The mechanism analysis indicates that specialized division and cost saving are mechanisms of the cross-border effect. The heterogeneity analysis reveals that the cross-border effect of internet development fosters the borrowing size for developing business and technological functions, while not significantly influencing cultural functions.