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Optimality in Municipal Debt: A Comment and Respecification

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  • Patrick J. Sullivan

    (Economic Development Division U.S. Department of Agriculture)

Abstract

The optimal level of debt financing by municipally owned and operated enterprises is examined, with particular emphasis placed on several misconceptions involved in an earlier article by Robert A. Collins. A respecified cost minimization model, taking the cost of risk bearing and the private rate of time preference into account, is proposed. The resulting policy implications for debt financing are very different from those argued by Collins and from those traditionally made for general-purpose municipal financing.

Suggested Citation

  • Patrick J. Sullivan, 1979. "Optimality in Municipal Debt: A Comment and Respecification," Public Finance Review, , vol. 7(3), pages 352-363, July.
    • Handle: RePEc:sae:pubfin:v:7:y:1979:i:3:p:352-363
    DOI: 10.1177/109114217900700306
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    References listed on IDEAS

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    1. Kessel, Reuben, 1971. "A Study of the Effects of Competition in the Tax-exempt Bond Market," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 706-738, July-Aug..
    2. Breton, Albert, 1977. "The Theory of Local Government Finance and the Debt Regulation of Local Governments," Public Finance = Finances publiques, , vol. 32(1), pages 16-28.
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