Shannon Roddel | June 18, 2018
It’s no secret the U.S. newspaper industry is in decline. Nationwide, circulation is down by some 40 percent in the last two decades, and this year alone, multiple prominent newsrooms, including those at the Denver Post and Sacramento Bee, have been further gutted by layoffs.
But new research from the University of Notre Dame shows the loss of city newspapers affects more than those nostalgic for print — it also leads to poorly run government and higher costs.
“Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance,” a working paper by Pengjie (Paul) Gao, Viola D. Hank Associate Professor of Finance in Notre Dame’s Mendoza College of Business, finds local newspapers hold their governments accountable in numerous ways.
“When local newspapers aren’t there to hold governments accountable, we see costs increase due to a lack of scrutiny over local deals,” Gao says. “With the loss of local news coverage also comes higher long-term borrowing costs for cities — more so than in neighboring counties. Costs for bonds increase from 5 to 11 basis points, and these results are not due to underlying economic conditions.
“Also, the increase in borrowing costs tends to happen only when the last newspaper disappears,” he says, “not when one leaves but others remain, indicating it’s the paper’s watchdog function rather than economics driving the effect.”
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