Monetary policy in the USA affects borrowing costs for state and local governments, incentivizing municipal borrowing and spending, which in turn affects economic outcomes. Using municipal bond indices and transaction-level data, I find that responses to monetary policy are dampened relative to treasuries and heterogeneous across location and bond characteristics. In my baseline estimate, muni yields move 26 bp after a 100 bp monetary shock. To study implications for local fiscal policy, I model US localities as small open economies in a monetary union with independent fiscal agents. In a calibrated model, monetary transmission is significantly affected by municipal borrowing costs.

A growing strand of literature relates pro-market institutions to business and overall employment creation. However, the effects of pro-market institutions on industry-specific employment creation still need to be better understood. Employment creation in some industries may be more sensitive to pro-market institutions. Moreover, if these industries employ a large proportion of the population, the role of local-level institutions becomes more critical for boosting employment creation across industries. Therefore, we disentangle the effects of local-level pro-market institutions on employment creation across nine major industries by using 5-year balanced panel data of 374 US metropolitan areas from 1972 to 2017. Our fixed-effects results indicate that pro-market institutions boost employment creation only in the manufacturing, retail, and construction sectors. Furthermore, our findings reveal that local public policies can benefit or harm local employment creation, depending on the concentration of industries in the area.

This is a study of the renegotiation of pay, employment security, and of the relationship between government and public sector unions, in an Australian state public service during and after the global financial crisis. It examines the extent to which this renegotiation of the ‘public service bargain’ was necessitated by austerity requirements, and the extent to which the crisis provided an opportunity for the deprivileging of public employment that has been an enduring feature of the neoliberal state. A case study of the different approaches of two Queensland governments to their relationships with public sector workers between 2009 and 2014, it tracks two key measures of wages and staff numbers, as well as the consequences of breaches of the trust relationships of the traditional public sector bargain. Given the moderate nature of Australia’s economic downturn, the implementation of public service austerity measures was less an economic necessity than an opportunity for a conservative government to alter employment policies and sever union relationships. This continuation of public sector employment relations favoured by previous conservative governments had electoral consequences.

The part of the UK fiscal framework which determines how UK government funding is allocated across the four home nations has undergone profound change since 2012, given tax and social security devolution. The UK government’s post-Brexit plans for regional development funding, state aid, regulation and trade negotiations have led to significant disagreements about the nature of the devolved fiscal and constitutional settlement. And the COVID-19 pandemic provided a major shock to a fiscal system with limited flexibility for the Scottish, Welsh and Northern Irish devolved governments. This paper reviews the changes and challenges faced during these reforms and policy shocks. We find that: tensions about reforms to funding arrangements reflect the inconsistency of principles guiding the reforms; that the UK government’s post-Brexit plans do reduce the policy autonomy of the devolved governments, but reflect powers central governments often have in even highly decentralised countries; and that temporary changes to rules and the nature of the COVID-19 pandemic prevented a subnational fiscal crisis, but that more systematic change may make the system more robust to future shocks. This suggests that a review of the principles underpinning the UK’s subnational fiscal and economic policies would be highly worthwhile.

Many states enhanced benefits in teacher retirement plans during the 1990s. This paper examines the school staffing effects of one such enhancement in a major urban school district with mostly high poverty schools. Pension rule changes in 1999 for St. Louis public school teachers resulted in large increases in pension wealth for active teachers, as well as a powerful increase in ‘push’ incentives for earlier retirement. Simple descriptive statistics on retirement patterns before and after the enhancements suggest much earlier retirement resulted. Shorter teaching spells imply a steady state with more teacher turnover and a larger share of novice teachers in classrooms. To better understand the long-run effects of these changes and alternative policies, the authors estimate a structural model of teacher retirement. Simulations of retirement behavior for representative senior teachers point to shorter completed teaching spells and earlier retirement age as a result of the enhancements. By contrast, moving from the post-1999 to a DC-type plan would extend the teaching career of a representative senior teacher by roughly two years.

In recent years, a growing number of capital market professionals have projected a low-return environment in US investment portfolios – where returns in most asset classes are expected to drop below historical rates. While these specific forecasts may not fully materialize, it is natural for cyclical investment markets to go through extended periods of lower returns, creating significant risks for public pension systems which rely on investment returns to sustain their long-term solvency and offset budgetary contributions. This paper uses a simulation method to examine the long-term effect of a low-return environment on the unfunded liabilities and contribution costs of US public pension systems while considering the moderating effects of asset allocation strategies, amortization approaches, and contribution policies.

Since 2001, public-pension plans have increasingly relied upon alternative investments (AIs). We examine the impact of this trend on investment performance and the factors that led to the reliance on AI. Using data from 92 largest plans 2001–2014, we found AI, especially private equity, generally had a positive effect on investment performance, but the effect was small and unsustainable. We also found that plans with a lower funded ratio and higher investment return expectation were more likely to allocate more assets to AIs. These findings suggest that the prospect of relying on AIs to meet investment return expectations remains a long-term challenge for state and local governments.

I analyze the effects of state public pension parameters on the retirement of public employees. Using a panel data set of public sector workers from 12 waves of the Health and Retirement Study, I model the probability of retirement as a function of pension wealth at early and normal retirement eligibility and Social Security coverage in the public sector job. I find that becoming eligible for early retirement, or receiving an early-out offer, significantly increases the probability of retiring. I do not find any effect of retirement wealth levels. These findings suggest that state legislative action to affect retirement decisions and reduce future pension costs would be most effective operating through plan eligibility rules and early-out incentives.

We investigated labor force and health outcomes in cities experiencing fiscal difficulties to assess how those difficulties might impact their employees. We matched 23 cities with bond downgrades and 31 cities with stable bond ratings to sampling units in the Medical Expenditure Panel Survey. Starting the year before the downgrade and for the four subsequent years, the rate of separation from local public employment fell in the cities with downgrades relative to the comparison group. Self-reported health may have worsened, but there were no statistically significant effects on health care use or spending.

Crime is an important outcome in many social policy evaluations. Benefits to society from preventing crime are based on avoiding victimization and freeing criminal justice system resources. For the latter, analysts need information about the marginal cost of policing for different types of crime across jurisdictions; however, this information is not readily available. This paper details key economic concepts relevant to law enforcement services, and then combines publicly available police expenditure data with insights from observational and time-diary studies to generate state-level, crime-specific, average variable cost estimates for crime-response services conducted by police by crime type. Since there is considerable uncertainty concerning various parameters underpinning these calculations, we use Monte Carlo simulation methods to incorporate the uncertainty into our estimates. This study finds that the U.S. population-weighted average variable cost of law enforcement response per police-reported Part 1 violent crime is $10,900, ranging from $6900 to $15,400 at the 10th and 90th percentiles, respectively. For a Part 1 property crime, the equivalent figure is $1300, with a range from $700 to $1700.

This article summarises the long-run decline in housing affordability in England and suggests this is substantially attributable to shortfalls in housing supply. Public attitudes to housing have become increasingly pro-development in recent years and the current policy framework – summarised in the article – seeks to provide a comprehensive and rounded response to the challenges facing the housing market.

We investigate allocation of funds by citizens across management options addressing impairments to coastal water quality. We study systematic variation in citizen allocation of funds to adaptive versus preventative strategies including the impact of referundum choices and test whether allocations will be impacted by cuing in the design of the referendum. Two key policy insights from our results: citizens who vote no on a water quality referendum have different preferences over allocating funds and providing cues to voters influenced allocation behavior. These results can assist decision makers in thinking about language used to communicate coastal water quality issues, particularly budget referenda.

In this paper we explain some of the difficulties of providing forecasts of the financial benefits of early intervention programmes, focussing on those delivered during the early childhood period. We highlight the diversity of early intervention, and the complexity and multiplicity of outcomes. We summarise recent work at the Early Intervention Foundation to assess the evidence on the impacts of early intervention, recognising the diversity of approaches to delivery and the importance of innovation and local practice as well as of rigorous approaches to evaluating causal effects. We also describe new ways of assessing accurately the local fiscal costs of late intervention and consider the implications of this for addressing the well-established barriers to investment in prevention. Our analysis brings to the fore gaps in the evidence from which even the most rigorous ‘gold-standard’ research is not immune. These limitations prevent the production of an accurate and realistic cost-benefit ratio or net present value for the majority of programmes as delivered in practice. We suggest some paths towards a firmer foundation of evidence and a better alignment of evidence and policy.

In the wake of the economic downturn of 2008–2009, researchers and policymakers have focused considerable attention on the extent of unfunded liabilities in US public sector pension plans and the implications for the long term fiscal sustainability of state and local governments. In response to the growth in liabilities, many states have introduced legislation that cuts back on defined benefit (DB) plan commitments, in some cases even shifting the pension system from a DB to a defined contribution or hybrid plan. This paper explores the factors that have led states to engage in pension reform, focusing particular attention on one factor that has only recently gained attention in the research literature: contribution volatility. While unfunded liabilities have significant long-term solvency implications, in the short term fluctuations in the amount of required contributions pose substantial difficulties for the ability of plan sponsors to balance budgets and engage in strategic planning. We begin by quantifying the volatility in the required contributions US states were expected to make between 2001 and 2013 and comparing the volatility of pension spending to other relevant tax and spending measures. Next, we describe the various types of pension reforms that states have implemented and examine the fiscal pressures facing those states that have engaged in reform. States with greater fluctuations in their required payments have been more likely to reduce benefits and increase employee contributions; they have also been more likely to institute these reforms sooner.

Fiscal stress pressures state legislators to either raise taxes or cut spending, but public pensions provide a vehicle to postpone tax increases and maintain current spending. I estimate that states cut their pension contributions at seven times the rate of other spending in response to fiscal stress. The cumulative impact of state undercontributions due to fiscal stress explains about 4% of mid-2008 actuarial underfunding. States not paying actuarially required contributions for reasons other than fiscal stress explains an additional quarter of underfunding. As investment returns explain little underfunding, much underfunding appears due to insufficient employee and actuarially required government contributions to keep up with growing pension liabilities.

This article describes the centralised nature of the UK, briefly describes the changes now under way in Scotland and Wales and then analyses differences in output per head as between nations and regions. It then considers the scope for devolution, including fiscal devolution within England. The United Kingdom today is one of the most fiscally-centralised of all OECD countries, but there will soon be reform in Scotland and Wales, with significant devolution of tax-raising powers to Edinburgh and Cardiff. In England, there is currently no ‘state’ or ‘regional’ tier of government. There have been significant differences in GDP/GVA per head of the nations and regions of the UK for many decades. Efforts to ‘rebalance’ the GDP/GVA totals shown above have involved public expenditure and investment programmes over several decades. The results of the UK's centralised distribution of resources, if any, on changes in regional and sub-regional performance are little studied. A highly-centralised system of taxation and public expenditure is not, it would appear, a guarantee of territorial economic equalisation. In a potentially radical policy departure, George Osborne has moved further than any minister in recent times towards a form of city-regional devolution within England. In the first instance, any devolved power is likely to be over public expenditure, though in the longer term fiscal devolution may become possible. The move towards a quasi-federal UK is now well under way.

This study analyzes the value of agricultural research to Florida by examining the effect of research spending on agricultural productivity, as measured by a total factor productivity index, and profitability, as measured by net farm income. Results suggest that research expenditures do increase agricultural productivity in the state. However, agricultural productivity does not affect net cash income. Further, the economic rents to the productivity gains do not accrue to land values. Instead, the economic value of research innovations accrues more to consumers than to producers. Thus, consumers are the ultimate beneficiaries of agricultural research in Florida, thereby justifying public funding for agricultural research.

The efficiency of public education is examined using a cost indirect output distance function. Efficiency estimates are obtained using data envelopment analysis applied to data from Georgia public schools. Georgia school districts utilize educational budgets with reasonable efficiency, achieving an overall efficiency of 98% with a range of 93%–100%. If all school districts were 100% efficient, outputs could be expanded 2%. This could be achieved by increasing funding $75.46 million state-wide in total for each of the 3 years. From the consumers' (voters') point of view, this result suggests that inefficiency costs Georgia, on average, a total of $226.38 million from 1994 to 1996.

Economic issues will be key determinants of the outcome of the Scottish referendum on independence. Pensions are a key element of the economic case for or against independence. The costs of funding pensions in an independent Scotland would be influenced by mortality risks, the costs of borrowing and the segmentation of costs and risks (i.e. pricing to Scotland's experience rather than pooled across UK experience). We compare the overall costs of providing pensions in an independent Scotland against the resources that are available to cover these costs. Scotland has worse mortality experience than the UK as a whole, and Scottish government debt is likely to attract a liquidity premium relative to UK government debt. An independent Scottish government would have to create a bond market for public debt. The liquidity premium would make pensions cheaper to buy, but taxpayers or the consumers of public services would have to pay the cost.

While no longer common in the private sector, most public sector employers offer retiree health insurance (RHI) as a retirement benefit to their employees. While these plans are thought to be an important tool for employers to attract, retain, motivate, and ultimately retire workers, they represent a large and growing cost. This paper reviews what is currently known about RHI in the public sector, while highlighting many important unanswered questions. The analysis is informed by data produced in accordance with the 2004 Government Accounting Standards Board Rule 45 (GASB 45). We consider the extent of the unfunded liabilities states face and explore what factors may explain the variation in liabilities across states. The importance and sustainability of RHI plans in the public sector ultimately depend on how workers view and value this post-retirement benefit, yet little is known about how RHI directly impacts the public sector labor market. We conclude with a discussion of the future of RHI plans in the public sector.