When a town’s newspaper shuts down, is it possible that local government will become more expensive or less efficient as a result?

A newstudyconducted at the University of Illinois at Chicago and Notre Dame says yes, that is a possible outcome.

Counties that experienced newspaper closures between 1996 and 2000. (Courtesy of Change Lee)

Counties that experienced newspaper closures between 1996 and 2005. (Courtesy of Change Lee)

Counties that experienced newspaper closures between 1996 and 2010. (Courtesy of Change Lee)

Counties that experienced newspaper closures between 1996 and 2015. (Courtesy of Change Lee)

“So we look at the relationship between newspaper closures and long-term government costs, and we found that after a newspaper closes, we see higher borrowing costs for that local municipality,” said Murphy, an assistant professor of finance at UIC.

He said the reasoning behind higher borrowing costs comes from the disappearance of a media watchdog to keep local government in check.

“So if a lender wants to lend money to a government, and they deem that the government is a risky borrower, then the lender would demand a higher interest rate,” Murphy said. “That’s a principle of finance.”

Lee joins us to discuss the study’s methodology and findings.

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