Abstract
PurposeWith a newly developed measure of economic freedom across US local government jurisdictions, this paper aims to estimate the relationship between economic freedom and bond ratings.Design/methodology/approachThe author uses a battery of cross-sectional econometric models to identify the impact that economic freedom might have on bond ratings using a sample of US municipal governments.FindingsOverall, the results indicate that relatively more economic freedom within a local jurisdiction is associated with higher bond ratings and thus lower borrowing costs. However, similar to Roychoundhury and Lawson (2010), no specific subcomponent seems to affect bond ratings.Originality/valueTo the author’s knowledge this is the first scholarly work to address this topic at the local level.
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