Statutory Framework, Institutional Constraints, and Municipal Bonds

The purpose of this research is to evaluate the institutional constraints associated with municipal bonds. Specifically, the influence of state level rules on the behavior of local governments.While much has been written about municipal bonds, few have examined various statutory frameworks governing the extent local governments have utilized municipal bonds to raise capital for public expenditures. According to the institutional collective action framework, institutional context matters in explaining the behaviors of local governments. On the issue of municipal bonds, local governments although generally having a choice whether to issue general obligation or revenue bonds, they are also confronted with institutional constraints on these two types of bond. To understand this institutional constraint further, we examine state level statutory frameworks in 50 states in the US. We evaluate major characteristics of state statute related to municipal bonds explaining the tendency for local governments to adopt competitive bidding and negotiated municipal bonds i.e., state requirements on the procedures, oversights, and sanctions related to issuing of municipal bonds. The data collection will be collected in the fall 2010. We expect the preliminary results will be ready by March 2011