Highway usage efficiency and debt burden: Evidence from China

China’s highway network experienced rapid expansion during the 2010s, accompanied by a surge in debt borrowed for construction. Are these newly-constructed highways being fully utilized? To examine the impact of usage efficiency on the debt burden, we construct a unique dataset that includes transportation densities and financial indicators of toll highways. Our findings indicate that declining usage efficiency significantly increases the debt burden. Specifically, for every additional 100 million yuan invested in toll road construction, the average freight density on the highway network decreases by 3,630 tons, and passenger density decreases by 1,340 individuals. The decline in usage efficiency escalates debt service payments and expands budget deficits. Heterogeneity analysis reveals that the drop in usage efficiency notably increases toll road debt burdens in economically less-developed regions and in government-repaid toll road projects.