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The Determinants of Municipal Debt Policy: A Pooled Time-Series Analysis

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  • R A Cropf
  • G D Wendel

Abstract

Cities have started to rely more on debt in recent decades, in large part in response to changes occurring externally. In this paper the authors analyze the impact of important social, political, and economic factors on municipal debt behavior. They examine the 42 largest US cities from 1980 to 1990, using a pooled time-series regression model. It was found that, generally speaking, these factors had the effect of increasing cities' reliance on revenue debt, which is less accountable to the voters than full-faith and credit debt. It is difficult to say whether local officials have consciously pursued a policy of insulating municipal debt decisions from the voters. However, it is clear that these officials are responding to environmental cues that lead them to prefer revenue debt over general-obligation debt by a large margin. Recent research has shown that cities have historically pursued a ‘politics of circumvention’. With the demand for debt increasing as other means for financing local services are constrained the effects on the polity of these preferences warrant serious attention.

Suggested Citation

  • R A Cropf & G D Wendel, 1998. "The Determinants of Municipal Debt Policy: A Pooled Time-Series Analysis," Environment and Planning C, , vol. 16(2), pages 211-224, April.
    • Handle: RePEc:sae:envirc:v:16:y:1998:i:2:p:211-224
    DOI: 10.1068/c160211
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    References listed on IDEAS

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    1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    2. Bunch, Beverly S, 1991. "The Effect of Constitutional Debt Limits on Stage Governments' Use of Public Authorities," Public Choice, Springer, vol. 68(1-3), pages 57-69, January.
    3. Thomas R. Swartz & John E. Peck, 1990. "The Changing Face of Fiscal Federalism," Challenge, Taylor & Francis Journals, vol. 33(6), pages 41-46, November.
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    Cited by:

    1. Rachel Weber, 2010. "Selling City Futures: The Financialization of Urban Redevelopment Policy," Economic Geography, Clark University, vol. 86(3), pages 251-274, July.
    2. Maria Teresa Balaguer-Coll & Diego Prior & Emili Tortosa-Ausina, 2013. "On the determinants of local government debt: Does one size fit all?," Working Papers 2013/16, Economics Department, Universitat Jaume I, Castellón (Spain).

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