Financing dies in darkness? The impact of newspaper closures on public finance

Abstract

We examine how local newspaper closures affect public finance outcomes for local governments. Following a newspaper closure, municipal borrowing costs increase by 5 to 11 basis points, costing the municipality an additional $650 thousand per issue. This effect is causal and not driven by underlying economic conditions. The loss of government monitoring resulting from a closure is associated with higher government wages and deficits, and increased likelihoods of costly advance refundings and negotiated sales. Overall, our results indicate that local newspapers hold their governments accountable, keeping municipal borrowing costs low and ultimately saving local taxpayers money.