Funding Public Works With Long-Term Debt in America’s Principal Cities

Recognizing the role of debt issuance as an important source of funding for public works, this article uses panel estimation methods to examine the dynamic factors influencing long-term debt issuance in America’s principal cities. While the random effects multivariate regression suggests that financial factors are the main drivers of long-term debt issuance, the cointegration analyses reveal that debt issuance maintains a long-term dynamic relationship with local financial, economic, and socio-demographic factors. Moreover, the vector error correction estimations show that a long-run relationship exists among local debt issuance and municipal level variables measuring economic, financial, and socio-demographic factors, and any deviations in the short term from the long-run path are slowly corrected over time. The study implies that the dynamic interactions between local debt and municipal factors should be considered when issuing debt for public works.