Dissertation: The Commitment Credibility of Public-Employee Pensions
My dissertation concerns defined-benefit pensions for public employees. A lack of national regulation has facilitated localized influence in plan policies, creating a real potential for underfunding and unsustainable growth. Maintaining pension promises while keeping governments functioning effectively is one of the fundamental policy challenges of the 21st Century. How does split authority between elected officials and quasi-independent management-boards contribute to variation in plan governance and the ultimate provision of public goods and services?
Though elected officials have the final say over pensions, less is known about plans' management boards, which also exert their own influence. The number of active employees in plans turns out to be the best predictor of board membership, suggesting that employee voice expands as plans cover more employees. Using both fixed effects and instrumental variables approaches, I then show how differences in boards shape plans' policies and funded levels. Active and retired board membership appears to influence the selection of discount rates, while more active membership is positively associated with plans' funded ratios. Interestingly, legislative gridlock is also associated with greater discount rates. However, I also find that plans' actual investment returns are poor predictors of their expected investment returns, irrespective of boards' compositions. While boards offer an important avenue by which governments can manage funds, they cannot solve pensions' governance challenges alone.
While the payment of pension benefits is mandatory, states do not have to make their Annual Required Contributions (ARCs) into funds. I ask what factors are associated making these payments. Politicians appear especially committed to making payments into plans covering police and fire employees. They also make smaller contributions when pensions' other two revenue streams increase: investment returns and employee contributions. Thus, politicians prefer not to devote money to pensions when possible. However, they do commit to pensions when it is politically expedient, as is the case when demonstrating support for police and fire employees.
Do pensions actually shape retirements? Pensions ought to create recruitment and separation incentives for employees. However, I show that declines in benefit levels and credibility could shrink these incentives. I then test an implication of that theory utilizing a new retirement rate proxy variable collected from over 1,000 plan reports. Greater employee contributions, I find, increase exits from public-sector work. Less politicized boards, in comparison, are associated with fewer retirements, suggesting employees remain in their jobs when they have more voice in plan decision-making.
We develop and assess an elite-information account of representation. Politicians face uncertainty about voter opinion, and use previous vote-margins to gauge future electoral outcomes. Losses in vote support elicit ideological moderation given new information about electorates. To test this account, we use rain around Election Day as a natural experiment in voting in U.S. House races from 1956 to 2008. We find each additional inch of rainfall exogenously dampens Democratic vote-margins and shifts incumbents rightward in subsequent Congresses. We find responsiveness mainly in competitive districts, and by Democrats rather than Republicans, suggesting a party asymmetry in representation. Overall, we highlight the importance of elite information uncertainty in the electoral connection, and show that idiosyncratic electoral effects can meaningfully impact legislative behavior.
Unlike elections involving candidates, the Supreme Court has declared that referendum spending limits would infringe upon free speech, as money cannot possibly corrupt propositions. Nonetheless, four states have imposed limits. We exploit this variation to examine how money influences referenda policies. Using machine learning models for text analysis and empirical analyses of referenda finance data, we explore how laws shape the kinds of policies that become ballot initiatives. Specifically, we find that business interests play a substantial role in influencing the language of propositions, and that that influence is especially pronounced in states lacking donation caps.
Courts have the power to oversee and overturn decisions made by bureaucratic agencies. While the Chevron decision was intended to give agencies more discretion, it still allows politically-motivated judges to take `hard looks' to justify overturning decisions. Here, I examine the incentives created by this process. An agency invests in observable effort to establish a discretion window around an ideal policy point. A politically-motivated judge then can exert effort to take a hard look, shrinking the window's size, and overturning any action outside the final window. A major result is that such judges overturn oppositional agencies, but only after both have inefficiently invested effort. As it stands, Chevron does little to enhance agency discretion if judges are `politicians in robes'.
Going Foreign in the Face of Gridlock. Working Paper.
Presidents have clear incentives, which they act upon, to increase their unilateral activity in foreign affairs when faced with both an oppositional and polarized congress. I empirically test this using data across several domains spanning 1948-2012, a period witnessing growing polarization. My findings show that presidents increasingly pivot to foreign over domestic affairs in the face of gridlock, highlighting the office's inherent advantages in the former domain. The results also point to an important consequence of legislative gridlock likely to continue into the foreseeable future.