Health Care Capital Financing Agencies: The Intergovernmental Roles of Quasi-Government Authorities and the Impact on the Cost of Capital

Posted: 18 Oct 2000 Last revised: 24 Jul 2008

See all articles by Alec Ian Gershberg

Alec Ian Gershberg

The New School - Robert J. Milano Graduate School of Management & Urban Policy ; National Bureau of Economic Research (NBER)

Michael Grossman

National Bureau of Economic Research (NBER), NY Office; CUNY The Graduate Center - Department of Economics

Fred Goldman

The New School; National Bureau of Economic Research (NBER)

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Abstract

During the decade 1983-1992, approximately 1.4 trillion dollars of municipal bonds were sold in 87 thousand separate issues, primarily to finance capital projects for education, electric power, transportation, health care, housing and other public and private purpose activities. Approximately two-thirds of these financings were originated by financing authorities, quasi-government agencies which are the creation of state legislatures. Despite the growing role played by quasi-public authorities in capital finance, their impacts have not been studied systematically. We first describe the issuers of tax-exempt debt in the health sector and then derive measures for describing the mix of issuers between state and local levels, and between both government and quasi-government sectors. We present abbreviated test results of the impact that different mixes have on the cost of capital. First, competition is good: using a Herfindahl index analysis we show that states with less concentrated issuers have a lower cost of capital than those with a more concentrated market, including state-level finance monopolies. On the other hand, we cannot assert unequivocally that market deconcentration in and of itself should be a goal. For instance, there are economies of scale in the health care finance industry that allow larger (often state-level) issuers to lower the cost of capital.

JEL Classification: I1, H7

Suggested Citation

Gershberg, Alec Ian and Grossman, Michael and Goldman, Fred, Health Care Capital Financing Agencies: The Intergovernmental Roles of Quasi-Government Authorities and the Impact on the Cost of Capital. Public Budgeting and Finance, Vol. 20, No. 1, pp. 1-23, Spring 2000. Available at SSRN: https://ssrn.com/abstract=243563

Alec Ian Gershberg (Contact Author)

The New School - Robert J. Milano Graduate School of Management & Urban Policy ( email )

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National Bureau of Economic Research (NBER) ( email )

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Michael Grossman

National Bureau of Economic Research (NBER), NY Office ( email )

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CUNY The Graduate Center - Department of Economics ( email )

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HOME PAGE: http://mgrossman.ws.gc.cuny.edu

Fred Goldman

The New School ( email )

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New York, NY 10011
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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