The impact of term limits on municipal borrowing costs

Alex Annan Abakah

Global Finance Journal, 2023, vol. 56, issue C

Abstract: Gubernatorial term limits constrain the number of terms that a governor can serve in office. In this regard, previous models (with imperfect information) indicate that governors tend to responsibly spend during the first term to build political capital, while the last term is associated with higher spending. In estimation with state fixed effects, we find that municipal bonds issued during a governor's last term are associated with higher yields. Such yields are related to spending in construction, highways, and pensions, with the effect mitigated when the governor runs for future political office. We also document that house term limits that constrain the terms of legislators are associated with higher bond yields.

Keywords: Municipal debt; Term limits; Bond yields (search for similar items in EconPapers)
JEL-codes: H11 H30 H74 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:56:y:2023:i:c:s104402832300025x

DOI: 10.1016/j.gfj.2023.100830

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