Financing Public Goods

58 Pages Posted: 7 Sep 2021

See all articles by Hanyi (Livia) Yi

Hanyi (Livia) Yi

Boston College - Carroll School of Management

Date Written: August 18, 2021

Abstract

I study whether and how shocks to the supply of municipal credit affect both the quantity and quality of local public goods. I use a difference-in-differences approach based on regulations that affected bank demand for municipal bonds. Credit-constrained municipalities cut spending, especially infrastructure investment. Public service quality deteriorates, manifested in increased water contamination and prolonged power outages. While amendments to the regulation mitigated municipal credit constraints, evidence is mixed on whether the quality of public service recovered. My results highlight the impact of financial market disruptions on local governments and people, and the unintended consequences of a post-crisis banking regulation.

Keywords: Municipal Bonds, Local Public Goods, Credit Supply, Banking Regulation

JEL Classification: H72, H74, G28

Suggested Citation

Yi, Hanyi, Financing Public Goods (August 18, 2021). Available at SSRN: https://ssrn.com/abstract=3907391 or http://dx.doi.org/10.2139/ssrn.3907391

Hanyi Yi (Contact Author)

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

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