Municipal and Economic Consequences of PFAS Contamination Discovery

55 Pages Posted: 20 Apr 2021 Last revised: 8 Feb 2024

See all articles by Daisy Huang

Daisy Huang

Southwestern University of Finance and Economics (SWUFE)

Amit Kumar

Singapore Management University - Lee Kong Chian School of Business

Date Written: March 1, 2021

Abstract

We show that discovery of contamination by pollutants that are unmonitored and unregulated adversely affects local municipal finances and economic conditions. We causally document a 9-basis-points increase in primary market yields of municipal bonds from the counties where per- and polyfluoroalkyl substances (PFAS) contamination was discovered for the first time, vis-à-vis the bonds from bordering, uncontaminated, same-state counties. The yields increased more for riskier bonds. We link the increased yields to a reduction in allocation by mutual funds and banks in the municipal bonds from the affected counties. These counties subsequently experienced heightened out-migration and depressed public expenditure and employment.

Keywords: Municipal Bonds, Drinking Water Contamination, PFAS Contamination, Forever Chemicals.

JEL Classification: G14, H72, H74, Q53, Q58.

Suggested Citation

Huang, Daisy and Kumar, Amit, Municipal and Economic Consequences of PFAS Contamination Discovery (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3821639 or http://dx.doi.org/10.2139/ssrn.3821639

Daisy Huang

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Amit Kumar (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://www.amitkmr.com

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