The growth of the digital economy and the expansion of the data factor market have created new opportunities for achieving Local Fiscal Sustainability.This article develops indicators for local fis-cal sustainability and utilizes intermediary effect models and panel threshold models to empirically ana-lyze the impact of the digital economy on local fiscal sustainability and its underlying mechanisms.The study reveals that the digital economy not only has a direct positive effect on local fiscal sustainability but also demonstrates intermediary effects.It enhances local fiscal sustainability by strengthening fiscal decentralization and improving the efficiency of fiscal expenditure,with a non-linear marginal effect that is increasing.Furthermore,the promoting effect of the digital economy on local fiscal sustainability illus-trates the Matthew effect,which further exacerbates regional disparities in fiscal sustainability.Accord-ingly,this article offers policy recommendations to enhance local fiscal sustainability in three areas:es-tablishing external conditions,repairing endogenous mechanisms,and improving institutional frame-works.
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