Political Competition and Rule-Based Financing in the Municipal Bond Market

14 Pages Posted: 22 May 2018 Last revised: 4 Jun 2018

See all articles by Marian W. Moszoro

Marian W. Moszoro

Warsaw School of Economics (SGH); International Monetary Fund (IMF); George Mason University - Department of Economics; George Mason University - Interdisciplinary Center for Economic Science (ICES)

Date Written: December 15, 2017

Abstract

I study the link between the choice of rule-based contracts and political competition through the municipal bond market. I provide evidence that when the probability of losing office is high, mayors are more likely to issue revenue bonds over general obligation bonds and to choose competitive bidding over negotiated sales. This relationship can help explain trends in public financing and spending. The choice of revenue bonds and competitive bidding insulates public officials from referendum checks and allegations of impropriety but requires higher interest rates and administrative costs.

Keywords: political oversight, strategic behavior, public finance

JEL Classification: D72, D73, H57

Suggested Citation

Moszoro, Marian W., Political Competition and Rule-Based Financing in the Municipal Bond Market (December 15, 2017). GMU Working Paper in Economics No. 18-13, Available at SSRN: https://ssrn.com/abstract=3169573 or http://dx.doi.org/10.2139/ssrn.3169573

Marian W. Moszoro (Contact Author)

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

HOME PAGE: http://economics.gmu.edu/people/mmoszoro

George Mason University - Interdisciplinary Center for Economic Science (ICES) ( email )

400P Truland Building
George Mason University
Fairfax, VA 22030
United States

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