Working Paper: NBER ID: w7356
Authors: Alec Ian Gershberg; Michael Grossman; Fred Goldman
Abstract: We explore the effects of two kinds of competition on the cost of capital in the tax-exempt bond market: (1) competition amongst underwriters and (2) competition amongst issuers (most of which are quasi-public special authorities sanctioned by state governments). The first kind of competition--essentially, competitive versus negotiated bidding processes--has received considerable attention in the literature. The second kind of competition, the number of potential issuers available to a beneficiary of a bond issue, has received far less attention and is related to the level of decentralization of the market for issuing bonds. Studies of the effects of competition have often used small samples of bond issues--often in one or a few states and for one or a few years--to reach their conclusions. Using a national database covering fourteen years, we find that both kinds of competition lower interest rates, at least in the hospital sector.
Keywords: No keywords provided
JEL Codes: I10; I11; I18; H74
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Competitive bidding processes (D44) | True Interest Cost (TIC) (E43) |
| Negotiated sales (L14) | True Interest Cost (TIC) (E43) |
| Increased competition among issuers (G24) | True Interest Cost (TIC) (E43) |
| Increased market concentration (D49) | True Interest Cost (TIC) (E43) |