The impact of surplus sharing on the portfolio mix of public sector defined benefit pension plans: a public choice approach

The riskiness of state employee pension plan portfolios varies across states. We investigate whether this variation is related to how public employees and taxpayers share actuarial surpluses of pension accounts. We focus on two determinants of a plan’s asset mix: the relative influence of public employees to taxpayers; and whether a surplus-sharing contract is specified. Our theoretical model demonstrates that the effect of public employee influence on the asset mix is ambiguous. Our empirical results corroborate this complex theoretical result. In our theoretical and empirical analyses, if a surplus sharing rule is specified, plans adopt a more aggressive investment allocation.     

Interests, Institutions, and the Reliability of International Commitments

One feature associated with democratic governance is frequent leadership turnover. While the ease of replacing leaders improves accountability, it may impede the ability of democracies to make credible long-term international commitments. Using newly collected data that identify cases in which leaders who derive their support from different domestic interests come to power, we evaluate the effects of changes in domestic political leadership on one important aspect of foreign policy—decisions to maintain military alliances. An analysis covering bilateral alliances between 1919 and 2001 reveals that changes in societal supporting coalitions in nondemocratic states are associated with decisions to abrogate alliances prior to their scheduled end dates, but changes in societal supporting coalitions in democracies have no effect on the probability of premature alliance termination. We conclude that international cooperation is sensitive to changes in core supporting coalitions, but that this effect is moderated by democratic political institutions.     

Agency Problems, the 17th Amendment, and Representation in the Senate

A prominent change in American electoral institutions occurred when the 17th Amendment to the Constitution established direct election of U.S. Senators as of 1914. How did this change the political agency relationship between the mass electorate and U.S. Senators? We develop theoretical expectations about the representational effects of direct election by a relatively inexpert mass electorate and indirect election by a relatively expert political intermediary, based on principal‐agent theory. The chief predictions are that the representative will be more responsive to the mass electorate under direct election, but will also have more discretion to pursue his or her own ends. We use the 17th Amendment as a quasi‐experiment to test the predictions of the theory. Statistical models show strong support for both predictions. Moreover, the 17th Amendment is not associated with similar changes in the U.S. House of Representatives—as expected, since the amendment did not change House electoral institutions.     

Exploiting a Rare Communication Shift to Document the Persuasive Power of the News Media

Using panel data and matching techniques, we exploit a rare change in communication flows—the endorsement switch to the Labour Party by several prominent British newspapers before the 1997 United Kingdom general election—to study the persuasive power of the news media. These unusual endorsement switches provide an opportunity to test for news media persuasion while avoiding methodological pitfalls that have plagued previous studies. By comparing readers of newspapers that switched endorsements to similar individuals who did not read these newspapers, we estimate that these papers persuaded a considerable share of their readers to vote for Labour. Depending on the statistical approach, the point estimates vary from about 10% to as high as 25% of readers. These findings provide rare evidence that the news media exert a powerful influence on mass political behavior.     

Collusion in auctions for emission permits: An experimental analysis

Environmental markets have several institutional features that provide a new context for the use of auctions and that have not been studied previously. This paper reports on laboratory experiments testing three auction forms—uniform and discriminatory price sealed‐bid auctions and an ascending clock auction. We test the ability of subjects to tacitly or explicitly collude in order to maximize profits. Our main result is that the discriminatory and uniform price auctions produce greater revenues than the clock auction, both with and without explicit communication. The clock appears to facilitate successful collusion, both because of its sequential structure and because it allows bidders to focus on one dimension of cooperation (quantity) rather than two (price and quantity).© 2009 by the Association for Public Policy Analysis and Management.     

Dynamic Representation(s): Federal Criminal Justice Policy and an Alternative Dimension of Public Mood

Does public policy respond to public opinion? Previous research suggests dynamic representation occurs in the aggregate. Yet, most of the evidence for policy response is limited to the policy intentions of elected officials on issues related to more or less government spending. We examine policy response to an alternative dimension of public mood, public preferences for more or less punitive criminal justice policies, using multiple indicators of policy from various stages of the policy-making process. Criminal justice policy should be responsive to public preferences given the public’s concern about crime and the negative social construction of criminals. Thus, there is an electoral incentive for public officials to respond to public preferences along this alternative dimension of public sentiment regarding criminal justice policy. We estimate a DYMIMIC model of federal criminal justice policy as a function of the multiple dimensions of public policy mood using Kalman filtering. The results indicate that criminal justice policy responds to the second, not the first, dimension of public mood. We find evidence that policy-makers at multiple stages of the policy process are able to differentiate among multiple signals from the public and respond appropriately. The results present a more sophisticated portrait of democratic responsiveness.