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The impact of term limits on municipal borrowing costs

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  • Abakah, Alex Annan

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.

Suggested Citation

  • Abakah, Alex Annan, 2023. "The impact of term limits on municipal borrowing costs," Global Finance Journal, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:glofin:v:56:y:2023:i:c:s104402832300025x
    DOI: 10.1016/j.gfj.2023.100830
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    More about this item

    Keywords

    Municipal debt; Term limits; Bond yields;
    All these keywords.

    JEL classification:

    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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