The share of households holding municipal debt has fallen from 4.6% in 1989 to 2.4% in 2013, writes Daniel Bergstresser of the Brandeis International Business School and Randolph Cohen of the Massachusetts Institute of Technology in a story for The Brookings Institution.

One reason for the shrinking appeal of tax-exempt municipal debt, Bergstresser and Cohen suggest, is that households have an increasing share of their savings in tax-advantaged retirement investment accounts, such as IRA and 401(k) plans, in which it rarely makes sense to hold tax-exempt debt.

But this trend could have serious consequences.

The authors speculate that the constituency for repaying municipal bonds at moments of fiscal distress could shrink along with the fraction of voters who hold the securities.

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