Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Effects of Political Competition on the Funding and Generosity of Public-Sector Pension Plans

Contents:

Author Info

  • Sutirtha Bagchi

Abstract

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 at which to discount future actuarial liabilities. An increase in the level of political competition by one standard deviation leads to a decline in the actuarial funded ratio of about 7–10 percent, an increase in the annual average retirement benefits of about $470–620 per retiree, and an increase in the interest rate for discounting actuarial liabilities of about 5 basis points. Instrumental Variable (IV) estimates generated using demographic characteristics of the population as instruments corroborate these findings.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: ftp://ideas.repec.org/pub/RePEc/jmp/files/2013/pba941.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Job Market Papers in its series 2013 Papers with number pba941.

as in new window
Length:
Date of creation: 22 Dec 2013
Date of revision:
Handle: RePEc:jmp:jm2013:pba941

Contact details of provider:
Web page: http://ideas.repec.org/jmp.html

Related research

Keywords:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bracco, Emanuele & Porcelli, Francesco & Redoano, Michela, 2013. "Political Competition, Tax Salience and Accountability: Theory and Some Evidence from Italy," CAGE Online Working Paper Series 126, Competitive Advantage in the Global Economy (CAGE).
  2. Gergely Ujhelyi, 2014. "Civil Service Rules and Policy Choices: Evidence from US State Governments," American Economic Journal: Economic Policy, American Economic Association, vol. 6(2), pages 338-80, May.
  3. Alicia H. Munnell & Jean-Pierre Aubry & Laura Quinby, 2010. "Public Pension Funding in Practice," NBER Working Papers 16442, National Bureau of Economic Research, Inc.
  4. Mumy, Gene E, 1978. "The Economics of Local Government Pensions and Pension Funding," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 517-27, June.
  5. Dennis Epple & Katherine Schipper, 1981. "Municipal pension funding: A theory and some evidence," Public Choice, Springer, vol. 37(1), pages 141-178, January.
  6. Jeffrey R. Brown & David W. Wilcox, 2009. "Discounting State and Local Pension Liabilities," American Economic Review, American Economic Association, vol. 99(2), pages 538-42, May.
  7. Robert Novy‐Marx & Joshua Rauh, 2011. "Public Pension Promises: How Big Are They and What Are They Worth?," Journal of Finance, American Finance Association, vol. 66(4), pages 1211-1249, 08.
  8. Inman, Robert P., 1982. "Public employee pensions and the local labor budget," Journal of Public Economics, Elsevier, vol. 19(1), pages 49-71, October.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:jmp:jm2013:pba941. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.