These sources indicate that more corrupt municipalities pay around .07% more in interest on their borrowings.
| Datapoint | Source | Value | Type | Year | | Increase in bond yields | Demographic Fractionalization and the Municipal Bond Market | .03% | Relationship to Corruption Measure | 2011 | | Increase in bond yields | Corruption, Political Connections, and Municipal Finance | .066% - .104% | Relationship to Corruption Measure | 2009 |
Demographic Fractionalization and the Municipal Bond Market
A two standard deviation change in the corruption measure is associated with a three basis point change in bond yields.
Corruption, Political Connections, and Municipal Finance
Our estimate of the corruption penalty on yields is statistically different from zero and ranges from 6.6 to 10.4 basis points depending on the specification. Our estimates suggest that the corruption premium is roughly the equivalent of a bond issue being rated more than 2.0 notches lower (e.g., from A- to below BBB), ceteris paribus.