Bond Insurance and Public Sector Employment

60 Pages Posted: 10 Aug 2019 Last revised: 21 Dec 2021

Date Written: August 27, 2019


This paper uses a unique data set of local governments' bond issuance, expenditure, and employment to study the impact of the monoline insurance industry's demise on local governments' operations. To show causality, I use an instrumental variable approach that exploits persistent insurance relationships and the cross-sectional variation in insurers' exposure to high-quality residential mortgage-backed securities. Governments associated with ailing insurers issued less debt, cut expenditures, and hired fewer workers. These effects are persistent. Partial equilibrium calculations show that affected governments' aggregate expenditures and employment levels in 2017 would have been 6% to 10% higher if bond insurance had remained available.

Keywords: Bond Insurance, Municipal Bonds, Real Effects, Financial Crisis

JEL Classification: G00, G01, G22, E60, J00, H00, H40, H70

Suggested Citation

Amornsiripanitch, Natee, Bond Insurance and Public Sector Employment (August 27, 2019). Available at SSRN: or

Natee Amornsiripanitch (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Philadelphia, PA
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics