Are Overlapping Local Governments Competing with Each Other When Issuing Debt?

29 Pages Posted: 19 Dec 2019

See all articles by Spencer Brien

Spencer Brien

Graduate School of Defense Management

Wenli Yan

University of Kentucky - James W. Martin School of Public Policy and Administration; Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Date Written: December 2, 2019

Abstract

Local public services are produced through various overlapping jurisdictions. This study examines how the issuance of municipal general obligation bonds is affected by the tax policies of overlapping local governments. The findings challenge the hypothesis that the shared tax base would be overused in a common-pool resource scenario. Instead, the empirical results show that the issuance of general obligation bonds is more likely in jurisdictions where counties and school districts make more intensive use of the property tax. These findings highlight the importance of the signals local governments receive from their overlapping neighbors regarding voters’ demand for additional public spending.

Keywords: Tax Competition, Local Government, Property Tax, Municipal Bonds

JEL Classification: H7, H74, H71, H77, H73

Suggested Citation

Brien, Spencer and Yan, Wenli, Are Overlapping Local Governments Competing with Each Other When Issuing Debt? (December 2, 2019). Available at SSRN: https://ssrn.com/abstract=3497070 or http://dx.doi.org/10.2139/ssrn.3497070

Spencer Brien (Contact Author)

Graduate School of Defense Management ( email )

555 Dyer Road
Monterey, CA 93943
United States

Wenli Yan

University of Kentucky - James W. Martin School of Public Policy and Administration ( email )

Lexington, KY 40506
United States

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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