EconPapers    
Economics at your fingertips  
 

Tax Advantages and Imperfect Competition in Auctions for Municipal Bonds

Daniel Garrett, Andrey Ordin, James W. Roberts and Juan Carlos Suárez Serrato ()

No 23473, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show that the effect of tax advantages of municipal bonds on the market structure of municipal bond auctions is a crucial determinant of state and local governments' borrowing costs. Reduced-form estimates show that increasing the tax advantage by 3-pp. lowers mean borrowing costs by 9-10%, consistent with a greater-than-unity passthrough elasticity. Non-parametric evidence shows that strategic participation and bidding in imperfectly-competitive auctions generates this greater-than-unity passthrough. Using a structural auction model to evaluate the efficiency of Obama and Trump administration proposals, we find that the reduction in municipal borrowing costs is 2.8-times the revenue cost of the tax advantage.

JEL-codes: D44 H71 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk, nep-pub and nep-ure
Date: 2017-06
Note: IO PE
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w23473.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23473

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w23473
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Series data maintained by ().

 
Page updated 2017-11-04
Handle: RePEc:nbr:nberwo:23473