The shuttering of local newspapers raises local government borrowing costs, according to a paper presented at the 2018 Municipal Finance Conference July 16-17 at the Brookings Institution in Washington. According to Brookings, the paper, “Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance,” also maintains that local newspapers are key in states with low-quality governance, and that online media are not serving as sufficient substitutes for local papers.
The papers authors, scholars from the University of Notre Dame and the University of Illinois at Chicago, looked at the effect of reduced local news coverage on local government finance. From 2003 to 2014, the circulation of local newspapers fell by 27 percent, and statehouse reporters fell by 35 percent.
With data on local papers and municipal bond yields from 1996 to 2015, the authors compare municipal bond yield spreads for counties with three or fewer local papers before and after a closure, to counties with no local papers shuttering. Three years after a newspaper closure, municipal bond yields in that county go up by 0.05 to 0.11 percentage points, they say.
The authors perform tests to illustrate that economic trends and other factors aren’t accounting for the numbers.
The scholars speculate that shuttering local papers raises government borrowing costs because less information is publicly available and officials aren’t watched as closely.
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