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Competition and Selection in Municipal Bond Sales: Evidence from Missouri
Author(s) -
ROBBINS MARK D.,
SIMONSEN BILL
Publication year - 2007
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.1540-5850.2007.00876.x
Subject(s) - competition (biology) , municipal bond , bond , selection (genetic algorithm) , audit , debt , obligation , government (linguistics) , local government , business , state (computer science) , selection bias , economics , finance , accounting , public administration , political science , law , medicine , linguistics , philosophy , algorithm , pathology , ecology , artificial intelligence , computer science , biology
This article describes the results of an interest cost analysis of local government debt issuance in the State of Missouri. In Missouri the vast majority of municipal bonds are sold on a “no bid” basis. We discuss the theoretical arguments for and against competition and selection. Then we determine the degree to which cost differences exist while correcting for any potential selection bias. We use data on local government general obligation bonds sold from May 2004 to May 2005 provided by the Missouri State Auditor's office. We find that this substantial lack of competition imposes significant costs on Missouri governments.