Wealth and Welfare
Gregory Hooks & Brian McQueen
American Sociological Review, April 2010, Pages 185-204
Abstract:
We examine Democrats' decline in the House of Representatives from the mid-1930s to the late 1940s. Debates over American exceptionalism in the realm of social policy pay surprisingly little attention to a profound transformation that occurred during and after World War II: on the international stage, the United States emerged as the hegemon; at home, the Pentagon became the largest and most powerful agency in the federal bureaucracy. In modeling electoral losses suffered by Democrats, we show that World War II mobilization played an important role. First, Democrats lost ground in congressional districts where the nascent military-industrial complex was created, specifically in aircraft manufacturing centers. Second, the impact of aircraft manufacturing intersected with wartime in-migration of non-whites. Democrats suffered significantly greater losses where both non-white population and aircraft manufacturing employment increased. Our findings corroborate accounts of the social welfare state that stress partisan control and path dependence. Conservative congresses of the immediate postwar years left an imposing legacy, making it difficult to establish social welfare reforms for decades to come. Whereas most accounts of the rise and fall of the New Deal emphasize different aspects of domestic processes, we demonstrate that militarism and expansion of national security agencies undermined congressional support at a critical juncture. This intersection of wartime mobilization and social policy-and not an inherent and enduring institutional impediment to social welfare-contributed to underdevelopment of the welfare state and abandonment of universal social welfare programs in the United States.
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The Conscription of Wealth: Mass Warfare and the Demand for Progressive Taxation
Kenneth Scheve & David Stasavage
Yale Working Paper, December 2009
Abstract:
The dominant narrative of the politics of redistribution in political science and economics highlights the signature role of the rise of electoral democracy and the development of political parties that mobilize working class groups. We argue in this paper that this narrative ignores the critical role played by mass warfare in the development of redistributive public policies. Focusing attention on the determinants of progressive taxation, we argue that mobilization for mass warfare led to demands for increased taxation of the wealthy in order to more fairly distribute the burden for the war effort. We then show empirically that over the last century mass mobilization for war has been associated with a notable increase in tax progressivity. In the absence of war neither the establishment of universal suffrage, nor the arrival of political control by parties of the Left is systematically associated with large increases in tax progressivity. In making these arguments we devote particular attention to a "difference-in-differences" comparison of participants and non-participants in World War I.
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Even in Sweden: The Effect of Immigration on Support for Welfare State Spending
Maureen Eger
European Sociological Review, April 2010, Pages 203-217
Abstract:
While the politics of globalization and welfare state retrenchment have garnered much attention in recent years, scholarly research on public support for welfare state expenditure is comparatively sparse. Furthermore, new pressures, specifically international immigration and resulting ethnic heterogeneity, add a new challenge to the welfare state. In this article, I analyse support for social welfare expenditure in Sweden-the country that spends the greatest percentage of its GDP on social expenditure and, until recently, remained relatively ethnically homogeneous. Results from multilevel models reveal that multiple measures of immigration at the county-level have significant negative effects on support for the welfare state. Moreover, recent immigration has a negative effect on attitudes towards universal spending. Thus, this analysis provides clear evidence that ethnic heterogeneity negatively affects support for social welfare expenditure-even in Sweden.
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Earnings Inequality and Subnational Political Economy in the United States, 1970-2000
Caroline Hanley
Research in Social Stratification and Mobility, forthcoming
Abstract:
Previous studies of rising inequality in the United States have overlooked the potential role of subnational political economic variation as an institution that shapes earnings restructuring. This paper uses hierarchical linear models to examine how state right-to-work laws contribute to growth in inequality in 80 metropolitan labor markets from 1970 to 2000. Contrary to conventional expectations, labor markets in states with right-to-work laws experience relatively mild growth in earnings inequality, and are less unequal by 2000 than non-RTW labor markets. The trend can not be fully explained by union density, job growth, uneven development or variation in racial inequality. The findings contribute to a distinctly sociological perspective on rising inequality that considers how social, institutional and economic factors interact at the local and state levels to shape earnings.
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Wrongful Discharge Laws and Innovation
Viral Acharya, Krishnamurthy Subramanian & Ramin Baghai
NYU Working Paper, March 2010
Abstract:
We show that wrongful discharge laws - laws that inhibit the common-law doctrine of "employment-at-will" - spur innovation. In our model, wrongful discharge laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish short-run failures of employees and thereby encourage employees to exert greater effort in risky but potentially mould-breaking projects. We provide supporting empirical evidence using the staggered adoption of wrongful discharge laws across the U.S. states. Using difference-in-difference tests, we show that firms and employees in the affected states engage in greater innovation, measured by the number of patents filed, citations to these patents, and the number of patents and citations per employee and per dollar of R&D expense. Using a novel dataset, we also document a "creative destruction" in the affected states: we find more new firms being created and more existing firms being destroyed, with an increase in both job creation and job destruction.
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How Much Is Employment Increased by Cutting Labor Costs? Estimating the Elasticity of Job Creation
Paul Beaudry, David Green & Benjamin Sand
NBER Working Paper, February 2010
Abstract:
In search and bargaining models, the effect of higher wages on employment is determined by the elasticity of the job creation curve. In this paper, we use U.S. data over the 1970-2007 period to explore whether labor market outcomes abide by the restrictions implied by such models and to evaluate the elasticity of the job creation curve. The main difference between a job creation curve and a standard demand curve is that the former represents a relationship between wages and employment rates, while the latter represents a relationship between wages and employment levels. Although this distinction is quite simple, it has substantive implications for the identification of the effect of higher wages on employment. The main finding of the paper is that U.S. labor market outcomes observed at the city-industry level appear to conform well to the restrictions implied by search and bargaining theory and, using 10-year differences, we estimate the elasticity of the job creation curve with respect to wages to be -0.3. We interpret this relatively low elasticity as reflecting a low propensity for individuals to become more entrepreneurial and create more jobs when labor costs are lower and variable profits are higher.
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Where did the soldiers go? The effects of military downsizing on college enrollment and employment
Meredith Kleykamp
Social Science Research, May 2010, Pages 477-490
Abstract:
This paper examines how the military drawdown in the early 1990s influenced aggregate trends in employment and college enrollment, evaluating whether the loss of military jobs resulted in observable increases or decreases in employment rates and/or college enrollment rates. Contrary to the expectation of worsening employment among black men in particular, the drawdown had little effect on employment. However, changes in military service did have a considerable impact on college enrollment among black men. The loss of military jobs was actually associated with substantial increases in college going; college enrollments among black men may have been as much as 10% points lower had they served in the military at the same levels observed in the early 1980s.
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Will Automatic Enrollment Reduce Employer Contributions to 401(K) Plans?
Mauricio Soto & Barbara Butrica
IMF Working Paper, December 2009
Abstract:
Many employers match employee contributions to 401(k) plans. However, the employer cost of continuing this practice may increase rapidly as trends towards automatic enrollment boost employee participation. This paper examines the relationship between employer matching behavior and automatic enrollment. Using a sample of large 401(k) plans, we find that match rates are about 7 percentage points lower among firms with automatic enrollment than among those without automatic enrollment, even controlling for firm characteristics. So while auto-enrollment increases the number of workers participating in private pensions, our findings suggest it might also reduce the level of pension contributions.
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Marco Del Negro, Fabrizio Perri & Fabiano Schivardi
NBER Working Paper, March 2010
Abstract:
The paper studies a fiscal policy instrument that can reduce fiscal distortions without affecting revenues, in a politically viable way. The instrument is a private contract (tax buyout), offered by the government to each citizen, whereby the citizen can choose to pay a fixed price in exchange for a given reduction in her tax rate for a period of time. We introduce the tax buyout in a dynamic overlapping generations economy, calibrated to match several features of the US income, taxes and wealth distributions. Under simple pricing, the introduction of the buyout is revenue neutral but, by reducing distortions, it benefits a significant fraction of the population and leads to sizable increases in aggregate labor supply, income and consumption.
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The Political Economy of Intergenerational Income Mobility
Andrea Ichino, Loukas Karabarbounis & Enrico Moretti
University of California Working Paper, February 2010
Abstract:
The intergenerational elasticity of income is considered one of the best measures of the degree to which a society gives equal opportunity to its members. While much research has been devoted to measuring this reduced-form parameter, less is known about its underlying structural determinants. Using a model with exogenous talent endowments, endogenous parental investment in children and endogenous redistributive institutions, we identify the structural parameters that govern the intergenerational elasticity of income. The model clarifies how the interaction between private and collective decisions determines the equilibrium level of social mobility. Two societies with similar economic and biological fundamentals may have vastly different degrees of intergenerational mobility depending on their political institutions. We offer empirical evidence in line with the predictions of the model. We conclude that international comparisons of intergenerational elasticity of income are not particularly informative about fairness without taking into account differences in politico-economic institutions.
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Can Social Security Explain Trends in Labor Force Participation of Older Men in the United States?
David Blau & Ryan Goodstein
Journal of Human Resources, March 2010, Pages 328-363
Abstract:
After a long decline, the Labor Force Participation Rate (LFPR) of older men in the United States leveled off in the 1980s, and began to increase in the late 1990s. We examine how changes in Social Security rules affected these trends. We attribute only a small portion of the decline from the 1960s-80s to the increasing generosity of Social Security over this period. Increases in the Full Retirement Age and the Delayed Retirement Credit explain one quarter to one half of the recent increase in the LFPR. Increasing educational attainment and increasing LFPR of married women also contributed to the recent rise.
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Government growth and private contributions to charity
Thomas Garrett & Russell Rhine
Public Choice, April 2010, Pages 103-120
Abstract:
We exploit the time-series properties of charitable giving to provide additional insights into the relationship between charitable contributions and government spending. Cointegration tests reveal a significant long-run relationship between several categories of charitable giving and government spending. Granger causality tests provide evidence on the short-run giving and spending relationship. Evidence suggests that charitable contributions to education respond quite differently to state and local government education expenditures versus federal government expenditures. We argue that the government spending and charitable giving relationship depends on the source of government revenue, how this revenue is used, and the rational ignorance of private donors.
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The Effective Target of the Social Security Disability Benefits Reform Act of 1984
Perry Singleton
Syracuse University Working Paper, November 2009
Abstract:
A substantial portion of the rise in Social Security Disability Insurance rolls since 1984 has been attributed to the Social Security Disability Benefits Reform Act. Using data from the National Health Interview Survey, I examine whom the Act effectively targeted. The analysis shows that new enrollees were demonstrably taller than previous enrollees, suggesting that the Act expanded eligibility to individuals in better health and socioeconomic circumstances. However, the estimated effect of increased SSDI eligibility on employment is low, suggesting that the Act targeted males who would have otherwise been unemployed.
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The Publicness of Policy Environments: An Evaluation of Subprime Mortgage Lending
Stephanie Moulton & Barry Bozeman
Journal of Public Administration Research and Theory, forthcoming
Abstract:
Previous evaluations of publicness have focused largely on organizations and organizational behavior. This analysis extends the applicability of publicness one step further, to consider the effect of the publicness of policy environments on resulting individual-level outcomes. Subprime or high-cost mortgage lending was an increasingly dominant strategy in the mid-2000s to deal with the uncertainty of extending mortgages to borrowers with perceived higher risk. However, contrary to efficiency pricing rationales, whether or not a borrower received a high-cost loan may not be completely determined by individual risk characteristics but may also be influenced by the lending environment. Through multilevel modeling, this analysis investigates the influence of the publicness of the lending environment at the county level on the probability of a borrower receiving a high-cost loan in 2006. The results indicate that an increase in the publicness of a lending environment reduces the probability of a borrower receiving a high-cost (subprime) mortgage. The implications of these findings not only contribute to mortgage lending but also provide a springboard to consider a key "meta-issue" in public administration: the interplay of political and economic authority in diverse policy and management environments, and the effects on individual-level outcomes.