Reevaluating the Benefits and Costs of Industrial Revenue Bonds

Abstract

In a recent article in this journal it was argued that the costs of Industrial Revenue Bonds exceed their benefits and the program, therefore, should be abolished. This note reevaluates the benefits and costs as presented in that article. It is concluded that the costs enumerated in the previous study were overstated whereas the benefits were understated. Among the social costs discussed, only transaction costs and distributional consequences are found to be valid. Absent from the previous study's benefit considerations was the increased capital formation resulting from low-interest Industrial Revenue Bonds.