Retirement Research Consortium

Past research has shown that income from the Social Security program has contributed to trends towards smaller households, greater residential independence—the tendency to live alone rather than with others—and a greater prevalence of home ownership late in life. However, the mechanism through which these associations operate has remained relatively unstudied. This paper addresses the possibility that Social Security income mediates the consequences of adverse events, whether "health shocks" such as a stroke or hip fracture, or "marital shocks," principally the death of a spouse. We measure housing consumption using the ratio of dwelling unit size (number of rooms) to number of household members—i.e., "rooms per person." We use panel data from the Health and Retirement Survey to model current housing consumption in relation to Social Security income as well as the occurrence of health and marital shocks over the two-year period preceding each survey year (1995; 2000; 2002; 2004; and 2006). We also use an instrumental-variables approach to deal with omitted-variables bias in the housing consumption equation, and include an additional control for selective loss from the sample due to entry into a nursing home. We find no effects of Social Security income on housing consumption once we control for selection and endogeneity, a result that contrasts sharply with past research findings. We also fail to find any evidence that Social Security mediates either health or marital shocks. However, we do find that health shocks, and to a lesser extent marital shocks, are strongly associated with both nursing home entry and changes in housing consumption.

Emerging market countries have experienced an unprecedented surge in both the volume and volatility of foreign investment inflows during the past two decades. While foreign investment inflows can contribute to growth and economic development, sudden investment outflows often trigger financial crises. To mitigate this risk of crisis, governments in emerging markets have adopted pro-market reforms, in large part to gain the confidence of international investors. Carrying out standard reforms, however, neither guarantees success in earning the confidence needed to attract foreign investment nor lessens vulnerability to crisis. Investors understand that reforms are not always permanent. Instead, as I argue, emerging market governments must also demonstrate that they are willing to "walk the walk," by incorporating enforcement mechanisms into such policy reforms that make their commitment to stable macroeconomic policies seem credible to international investors.
This dissertation answers the question: how can emerging market governments make their commitments to pro-market reforms and stable macroeconomic policies seem credible to international investors? I suggest that credibility is associated with interest groups that emerge during the process of adopting reforms. When interest groups are created that both share policy preferences with international investors and can influence domestic policy decisions, the groups serve as a signal to international investors that governments will remain committed to the reform agenda. To assess the validity of this theory, I compare the effects of two policy reforms that occurred in many emerging market countries in the 1990s: pension privatization and the adoption of fiscal responsibility laws. I draw on both quantitative evidence, based on analyses of crosscountry, time-varying data for emerging market countries in Latin America, Eastern Europe and Asia, as well as qualitative evidence, based on interviews with policy makers and interest group leaders in Latin America.