IDEAS home Printed from https://ideas.repec.org/a/eee/glofin/v63y2024ics104402832400111x.html
   My bibliography  Save this article

Political polarization and state government bonds

Author

Listed:
  • Li, Pei
  • Tang, Leo
  • Cloyd, C. Bryan

Abstract

This study examines the effect of political polarization in state legislatures on state bond yields in the United States. Political polarization, defined as the ideological divide between Democratic and Republican members of the state legislative chambers, reflects legislators' willingness to seek bipartisan compromises. We expect high polarization states to be riskier because they are likelier to experience gridlock, negatively affecting economic development and debt service commitment. Findings suggest a significant positive relation between bond yields and political polarization. A one-standard-deviation increase in polarization increases bond yields by 7.81 basis points and total interest expense by $2.3 million for an average bond issue. Additionally, this study finds that the effect of polarization on bond yields is stronger for general obligation bonds.

Suggested Citation

  • Li, Pei & Tang, Leo & Cloyd, C. Bryan, 2024. "Political polarization and state government bonds," Global Finance Journal, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:glofin:v:63:y:2024:i:c:s104402832400111x
    DOI: 10.1016/j.gfj.2024.101039
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S104402832400111X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.gfj.2024.101039?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Government borrowing cost; Political polarization; State bonds;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • G00 - Financial Economics - - General - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H00 - Public Economics - - General - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:glofin:v:63:y:2024:i:c:s104402832400111x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620162 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.