Jeffrey B. Liebman

What Can We Learn about Neighborhood Effects from the Moving to Opportunity Experiment

Experimental estimates from Moving to Opportunity (MTO) show no significant impacts of moves to lower‐poverty neighborhoods on adult economic self‐sufficiency four to seven years after random assignment. The authors disagree with Clampet‐Lundquist and Masseys claim that MTO was a weak intervention and therefore uninformative about neighborhood effects. MTO produced large changes in neighborhood environments that improved adult mental health and many outcomes for young females. Clampet‐Lundquist and Masseys claim that MTO experimental estimates are plagued by selection bias is erroneous. Their new nonexperimental estimates are uninformative because they add back the selection problems that MTOs experimental design was intended to overcome.

The Taxation of Executive Compensation

Over the past 20 years, there has been a dramatic increase in the share of executive compensation paid through stock options. We examine the extent to which tax policy has influenced the composition of executive compensation, and discuss the implications of rising stock-based pay for tax policy. We begin by describing the tax rules for executive pay in detail and analyzing how changes in various tax rates affect the tax advantages of stock options relative to salary and bonus. Our empirical analysis leads to three conclusions. First, there is little evidence that tax changes have played a major role in the dramatic explosion in executive stock-option pay since 1980. Although the tax advantage of options has approximately doubled since the early 1980s, options currently have only a slight tax advantage relative to cash--approximately

Would People Behave Differently If They Better Understood Social Security? Evidence from a Field Experiment

4 per

The Middle Class Parent Penalty: Child Benefits in the U.S. Tax Code

100 of pretax compensation to the executive. A more convincing story for the dramatic explosion in stock options involves changes in corporate governance and the market for corporate control. For example, there is a strong correlation between the fraction of shares held by large institutional investors and the fraction of executive pay in the form of stock options, a result that holds both longitudinally and cross-sectionally. Second, we find evidence that the million-dollar rule (which limited the corporate deductibility of non-performance-related executive compensation to

Beyond Treatment Effects: Estimating the Relationship Between Neighborhood Poverty and Individual Outcomes in the MTO Experiment

1 million) led firms to adjust the composition of their pay away from salary and toward performance-related pay, although our estimates suggest that this substitution was minor. We find no evidence that the regulation decreased the level of total compensation. Third, we examine whether there is evidence for significant shifting of the timing of option exercises in response to changes in tax rates. After replicating Goolsbees (1999) result regarding tax shifting with our data for the 1993 tax reform, we show that no such shifting occurred in either of the two tax reforms of the 1980s. Moreover, we find evidence that much of the unusually large level of option exercises in 1992 was the result of the rising stock market rather than the change in marginal tax rates.

Chapter 32 Social security

This paper presents the results of a field experiment in which a sample of older workers was randomized between a treatment group that was given information about key Social Security provisions and a control group that was not. The experiment was designed to examine whether it is possible to affect individual behavior using a relatively inexpensive informational intervention about the provisions of a public program and to explore the mechanisms underlying the behavior change. We find that our relatively mild intervention (sending an informational brochure and an invitation to a web-tutorial) increased labor force participation one year later by 4 percentage points relative to the control group mean of 74 percent and that this effect is driven by a 7.2 percentage point increase among female subjects. In addition to affecting actual labor supply behavior, the information intervention increased survey measures of the perceived returns to working longer, especially among female respondents.

Are CEOS Really Paid Like Bureaucrats

Low-income families with children receive large tax benefits from the Earned Income Tax Credit, while high-income taxpayers receive large tax benefits from dependent exemptions (whose value is greater to those in higher tax brackets). In contrast, middle-income parents receive substantially smaller tax benefits associated with children. This U-shaped pattern of benefits by income, which we call the middle-class parent penalty, not only raises issues of fairness; it also generates marginal tax rates and marriage penalties for moderate-income families that are as high or higher than those facing more well-to-do taxpayers. This paper documents how the tax benefits of children vary with income, and illustrates their effect on marginal tax rates and marriage penalties. It then examines five options for reducing or eliminating the middle-class parent penalty and the high marginal tax rates and marriage penalties it produces.

Saving Incentives for Low- and Middle-Income Families: Evidence from a Field Experiment with H&R Block

Several important social science literatures hinge on the functional relationship between neighborhood characteristics and individual outcomes. Although there have been numerous non-experimental estimates of these relationships, there are serious concerns about their reliability because individuals self-select into neighborhoods. This paper uses data from HUD’s Moving to Opportunity (MTO) randomized housing voucher experiment to estimate the relationship between neighborhood poverty and individual outcomes using experimental variation. In addition, it assesses the reliability of non-experimental estimates by comparing them to experimental estimates. We find that our method for using experimental variation to estimate the relationship between neighborhood poverty and individual outcomes – instrumenting for neighborhood poverty with site-by-treatment group interactions – produces precise estimates in models in which poverty enters linearly. Our estimates of nonlinear and threshold models are not precise enough to be conclusive, though many of our point estimates suggest little, if any, deviation from linearity. Our non-experimental estimates are inconsistent with our experimental estimates, suggesting that non-experimental estimates are not reliable. Moreover, the selection pattern that reconciles the experimental and non-experimental results is complex, suggesting that common assumptions about the direction of bias in non-experimental estimates may be incorrect.

Moving to Opportunity: Interim Impacts Evaluation

Abstract This chapter reviews the theoretical and empirical issues dealing with Social Security pensions. The first part of the chapter discusses pure pay-as-you-go plans. It considers the effects of introducing such a plan on the present value of consumption, the optimal level of benefits in such plans, and the empirical research on the effects of pay-as-you-go pension systems on labor supply and saving. The second part of the chapter discusses the transition to investment-based systems, analyzing the effect on the present value of consumption of such a transition and considering such issues as the distributional effects and risk associated with such systems.