NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Andrey Ordin

Duke University
213 Social Sciences
Durham, NC 27705

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org

NBER Working Papers and Publications

June 2017Tax Advantages and Imperfect Competition in Auctions for Municipal Bonds
with Daniel Garrett, James W. Roberts, Juan Carlos Suárez Serrato: w23473
We study the interaction between tax advantages for municipal bonds and the market structure of auctions for these bonds. We show this interaction can limit the ability of bidders to extract information rents and is a crucial determinant of state and local governments' borrowing costs. Reduced-form estimates show that increasing the tax advantage by 3 pp. lowers mean borrowing costs by 9-10%, consistent with a greater-than-unity passthrough elasticity. We estimate a structural auction model to measure markups, and to illustrate and quantify how the interaction between tax policy and bidder strategic behavior leads to large passthrough elasticities. We use the estimated model to evaluate the efficiency of Obama and Trump administration policies that limit the tax advantage for municipal bon...
 
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