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Defined benefit (DB) pension plans incentivize “salary spiking,” where sharp increases in pay are leveraged into significantly higher levels of retirement compensation. While egregious instances of salary spiking occasionally make headlines, there is little guidance on the definition of salary-spiking behavior or understanding of its prevalence. We develop empirical methods to quantify the prevalence of salary spiking by identifying cases where end-of-career compensation deviates from the expected level of compensation. We apply this method to teacher pension systems in Illinois to assess the prevalence of salary spiking before and after the implementation of a reform designed to dissuade salary spiking.

Longitudinal administrative data generated by public education systems in the United States have become increasingly available and have tremendous potential to inform policy research. While it is t...

Despite their widespread use, there is little academic evidence on whether applicant selection instruments can improve teacher hiring. We examine the relationship between two screening instruments used by Spokane Public Schools to select classroom teachers and three teacher outcomes: value added, absences, and attrition. We observe all applicants to the district (not only those who are hired), allowing us to estimate sample selection-corrected models using random tally errors and variation in the level of competition across job postings as instruments. Ratings on the screening instruments significantly predict value added in math and teacher attrition, but not absences—an increase of one standard deviation in screening scores is associated with an increase of about 0.06 standard deviations of student math achievement, and a decrease in teacher attrition of 3 percentage points. Hence the use of selection instruments appears to be a key means of improving the quality of the teacher workforce.

Barriers to mobility, particularly those imposed by state-level licensure procedures have received growing attention in the media and in reform discussions. Much of this attention is driven by shortages of teachers in some regions and subject areas and the fact that barriers to mobility make it more difficult for states to address such shortages by drawing on whatever surplus of labor may exist out of state. But there are reasons to expect that lowering barriers to mobility would be beneficial to the teacher labor market even in the absence of shortages. To the extent that teachers value locational flexibility, lowering barriers to mobility could make the teaching profession more desirable to prospective entrants and reduce attrition among experienced teachers who may opt out of the profession following a move to a new state. The authors describe how licensure procedures and pension systems impose costs on teachers who cross state borders, discuss the evidence on whether teachers are responding to these disincentives to mobility, and consider possible reforms that would lower barriers to teacher mobility.

Public pension systems in many U.S. states face large funding shortfalls, and policymakers have considered moving toward defined contribution (DC) pension structures in the interest of reducing the likelihood of future shortfalls. Concerns exist, however, that such changes might increase levels of employee turnover. The empirical evidence on the relationship between pension structure and turnover is mixed, and is quite limited in the case of public-sector plans. The authors study a single class of public-sector employees (teachers) who are enrolled in either a traditional defined benefit (DB) plan or a hybrid DB-DC plan during overlapping periods of time. Contrary to conventional wisdom, the authors find little evidence that the introduction of the hybrid plan increased employee turnover; in fact, they find that turnover is lower among teachers who transferred out of the DB plan into the hybrid plan. Employers may benefit by shifting the debate away from plan structure per se and toward a discussion of how to provide employees with pension plans they will highly value.

This paper examines the savings behavior of public school teachers who are enrolled in a hybrid pension plan that includes a defined contribution (DC) component. Few states have incorporated DC features into teacher pension systems and little is known about how providing teachers with greater control over deferred compensation might affect their savings behavior—an important determinant of retirement security. We find the retirement savings choices of teachers—how much they opt to contribute to a DC retirement account—to be generally consistent with that of their peers in the private sector. In particular, age and salary are positively correlated with contribution rates, and contribution rates increase with teaching experience. Importantly, our analysis of retirement wealth suggests that Washington's hybrid plan is likely to provide a level of retirement security for a typical teacher that is comparable to or greater than that provided by the state's pure defined benefit plan.

Most public school teachers in the United States are enrolled in defined benefit (DB) pension plans. Using administrative microdata from four states, combined with national pension funding data, we show these plans have accumulated substantial unfunded liabilities—effectively debt—owing to previous plan operations. On average across 49 state plans, an amount that exceeds 10% of current teachers’ earnings is being set aside to pay for previously accrued pension liabilities. To the extent that the costs of the unfunded liabilities drag on teacher compensation, they may exacerbate problems of teacher recruitment and retention. We briefly discuss three policy changes that could end or reduce the accumulation of unfunded liabilities in educator pension plans: (1) transition teachers to defined-contribution retirement plans, (2) transition teachers to cash-balance retirement plans, and (3) tighten the link between funding and benefit formulas within the current defined-benefit structure.

Due to data limitations, very little is known about patterns of cross-state teacher mobility. It is an important issue because barriers to cross-state mobility create labor market frictions that could lead both current and prospective teachers to opt out of the teaching profession. In this article, we match state-level administrative data sets from Oregon and Washington and present evidence on patterns of in-service teacher mobility between these two states. We find levels of cross-state mobility that are drastically lower than levels of within-state mobility, even when accounting for proximity to the border. These findings are consistent with the hypothesis that there are significant penalties to cross-state mobility that may be attributable to state-specific licensure regulations, seniority rules, and pension structures.

This paper examines a natural experiment in which Washington State teachers were offered the opportunity to choose between enrolling in a traditional defined benefit (DB) plan and a hybrid plan with DB and defined contribution (DC) components. We find plan preference is weakly related to estimates of the relative financial benefits of being in either the DB or hybrid system and strongly related to teacher age. Importantly, we also find that the majority of teachers prefer the hybrid plan, and that teachers opting into the hybrid plan tend to be more effective based on student output measures of teacher productivity. These results suggest that policy shifts toward pension systems that include DC options do not necessarily make teaching a less desirable profession, particularly for the most productive employees.

Land-use regulations are contentious everywhere because of their potential negative effects on private property values. In recent years, so-called pay or waive compensation legislation was passed in a number of US states, requiring governments to compensate property owners for losses due to land-use regulations or grant exemptions from the regulations in lieu of compensation. We provide an overview of the compensation statutes in six US states, discuss the economic issues raised by the statutes, and examine the effects of the statutes in practice. Although these laws require that "just compensation" be estimated accurately and consistently, measuring the effects of land-use regulations on property values is extremely challenging in practice. We find that rather than providing relief to property owners unfairly burdened by land-use regulations, the compensation statutes appear primarily to discourage local governments from developing and implementing land-use regulations. (JEL: Q24, R52) Copyright 2014, Oxford University Press.

This paper addresses the question of a causal link between global warming and urban sprawl by focusing on the role local climate plays in determining household behavior regarding housing decisions. We introduce a theoretical model with a climatic amenity along urban economics lines, and consider the hypothesis that under a warmer climate, households will locate in larger plots, farther away from city centers. This hypothesis is tested empirically on household data,and by controlling for selection in simultaneous equations for housing size and distance to community center. We find evidence that housing decisions on plot size and distance to the city are related to climate differences. Global warming and urban sprawl strengthen each other in a vicious circle.

Oregon's landmark land use planning system has been criticized for imposing large negative effects on landowners’ property values, although evidence to support these claims has been lacking. This paper examines longitudinal data for undeveloped parcels since before adoption of the planning system. The sample includes parcels under different land use regulations, and it compares Oregon to Washington. The results indicate generally that property values have increased at similar rates both inside and outside urban growth boundaries, and across parcels zoned for different uses and across state lines. The results are consistent both with theory and with other studies indicating land use regulations can have positive, neutral or negative effects.

Over the past two decades, the tension between public and private interests in the use of land has given rise to state-level legislation seeking to limit government controls on private property. In 2004, voters in Oregon approved Measure 37, which required payments to private landowners for reductions in the value of their property resulting from land-use regulations. The central economic question behind Measure 37 and compensation statutes adopted in other states is, what is the effect of land-use regulations on property values? Economists investigating this question have typically estimated hedonic property value models with regulations included as exogenous regressors. This approach is likely to be invalid if the parcel characteristics that determine property values also influence the government's decision about how to implement regulations. We use Regression Discontinuity Design (RDD) to study the effect of the Portland, Oregon, Urban Growth Boundary (UGB) on property values. RDD provides an unbiased estimate of the treatment effect under relatively mild conditions and is well-suited to our application because the UGB defines a sharp treatment threshold. We find a price differential on the western and southern sides of the Portland metropolitan area ranging from $30,000 to at least $140,000, but no price differential on the eastern side. Support for Measure 37 was fueled by price differences such as these among parcels subject to different regulations, but one must be careful not to view current price differentials as evidence that regulations have reduced property values.

The vast majority of dry cleaners worldwide use the toxic chemical perchloroethylene (PCE), which is associated with a number of adverse health and environmental impacts. Professional wet cleaning was developed as a nontoxic alternative to PCE dry cleaning but has not been widely adopted as substitute technology. In the greater Los Angeles, CA, region, a demonstration project was set up to showcase this technology and evaluate its commercial viability by converting seven cleaners from PCE dry cleaning to professional wet cleaning. The demonstration site cleaners who switched to professional wet cleaning were able to maintain their level of service and customer base while lowering operating costs. The cleaners were able to transition to professional wet cleaning without a great degree of difficulty and expressed a high level of satisfaction with professional wet cleaning. Crucial to this success was the existence of the demonstration project, which helped to develop a supporting infrastructure for professional wet cleaning that had otherwise been lacking in the garment care industry.