Three Essays in Public Finance and Regulation.

Abstract

1. Essay 1: In politically competitive jurisdictions, there can be strong electoral incentives to underfund public pensions in order to keep current taxes low. I examine this hypothesis using panel data for 2,000 municipal pension plans from Pennsylvania. The results suggest that as a municipality becomes more politically competitive, it tends to have pension plans that are less funded, more generous, and use higher interest rates to discount future actuarial liabilities. IV estimates generated using demographic characteristics of the population as instruments corroborate these findings. 2. Essay 2: This paper looks at whether political ideology matters for enforcement of the nation’s tax laws. An analysis of the IRS budget and personnel suggests that the party affiliation of the President makes a modest difference to the overall level of IRS resources. However, there are significant increases in the number of IRS employees devoted to criminal investigation and revenue collection under Democratic administrations. Audits of tax returns filed by corporations, individuals, estates, and trusts are also significantly more likely under Democratic administrations. The body of evidence suggests that while Congress has a greater influence in determining the overall level of resources available to the IRS, the President has a more pronounced influence on the allocation of those resources. 3. Essay 3: Between 2005 and 2008, 19 of the 50 states of the U.S. reformed the franchising process for cable television, significantly easing entry into local markets. Using a difference-in-differences approach that exploits the staggered introduction of reforms, we find that prices for “Basic” service declined systematically by about 5.5 to 6.8 percent following the reforms, but we find no statistically significant effect on average price for the more popular “Expanded Basic” service. Our analysis shows that the decline in price for “Basic” service holds for markets that did not experience actual entry, consistent with limit pricing by incumbents. To control for potential state-level shocks correlated with the reforms, we undertake a sample-split test examining changes in local markets which faced a greater threat of entry; we find larger declines in prices, for both “Basic” and “Expanded Basic” services in these markets.