2020 SER Prize

On “Spatial Mismatch and Youth Unemployment in US Cities: Public Transportation as a Labor Market Institution,” the committee chair writes: Brandtner, Lunn, and Young’s paper examines the spatial mismatch theory (referring to geographical distance between home and job opportunities that could generate unemployment) by testing whether public transit systems can reduce urban youth unemployment with a longitudinal dataset of 96 US cities over a 10-year period. Departing from the existing research of the special mismatch thesis that is based on few cases, the paper pushes the debate forward with a large-scale longitudinal study. The hypotheses are carefully tested. The findings are insightful; not only does the paper show that public transit can help to reduce urban youth unemployment, but it further specifies the condition of the effectiveness of the public transit, which depends on the existing levels of car dependence. This means that improvement in public transit accessibility will have a strong influence on reducing the youth unemployment rate in car independent cities, whereas in car-dependent cities, there are few benefits from investment in public transit to reduce youth unemployment without changing other aspects of the urban design. The argument of the role of public transit as a labor market institution bears important policy implications and can certainly be extended and examined in other countries. The committee members believe this is surely going to become a classic when discussing the spatial mismatch question.

On “Permanent Budget Surpluses as a Fiscal Regime,” the committee chair writes: The puzzle in Haffert’s paper is brilliantly set up and motivated by the “negative cases” that the author terms the “fiscal surpluses regime.” Conventionally, public choice tradition anticipates a deficit bias of democracy due to the short-term incentives of politicians to use deficit spending to increase the probability of re-election. Yet, some countries are characterized by “surplus regimes” that passed through not merely a few years of budget surpluses but prolonged periods of fiscal surpluses. How is this phenomenon to be explained?  By taking the most dissimilar case comparison design and showing the similar long-term fiscal consolidation in Canada and Sweden (institutionally heterogeneous cases of surplus regimes) and contrasting them with other OECD countries that only managed to maintain fiscal surpluses for two or three years in a row, Haffert argues that a path-dependent shift in the balance of power among the competing fiscal policy coalitions can explain the variation. The fiscal policy is shaped by opposing fiscal coalitions, with an expenditure coalition that benefits from public expenditures and a tax-cut coalition that benefits from tax cuts. A fiscal crisis provides opportunities for reshuffling the coalitions. If the crisis is sufficiently deep, public sector cuts shift a portion of the middle-class to the side of the tax-cut coalition, because the middle-class gets used to the idea that services (e.g. pensions) need to be purchased, and that over time it will become a net beneficiary of tax cuts. In turn, the crisis-induced expenditure cut consolidation strengthens the tax-cut coalitions and legitimizes continuing lower spending in exchange for future returns in the form of lower taxes, thus explaining the persisting surpluses regimes. The findings suggest that the crisis responses and the resulting reconfiguration of coalitions have long-term consequences for policy choices. 

This paper is strong in setting up a novel object of study by moving the terms of the debate from how to balance the budget (a question of policy change) to how to address the question of policy continuity. Through an articulated analytical frame with a small N approach, the author makes some insightful observations and arguments.