The Intergenerational Transfer of Public Pension Promises
AbstractThe value of pension promises already made by US state governments will grow to approximately $7.9 trillion in 15 years. We study investment strategies of state pension plans and estimate the distribution of future funding outcomes. We conservatively predict a 50% chance of aggregate underfunding greater than $750 billion and a 25% chance of at least $1.75 trillion (in 2005 dollars). Adjusting for risk, the true intergenerational transfer is substantially larger. Insuring both taxpayers against funding deficits and plan participants against benefit reductions would cost almost $2 trillion today, even though governments portray state pensions as almost fully funded.
Download InfoIf 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.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14343.
Date of creation: Sep 2008
Date of revision:
Note: AG AP CF PE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-29 (All new papers)
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.:
- Sundaresan, Suresh & Zapatero, Fernando, 1997. "Valuation, Optimal Asset Allocation and Retirement Incentives of Pension Plans," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 631-60.
- Giertz, J. Fred & Papke, Leslie E., 2007. "Public Pension Plans: Myths and Realities for State Budgets," National Tax Journal, National Tax Association, vol. 60(2), pages 305-23, June Cita.
- Daniel Bergstresser & Mihir Desai & Joshua Rauh, 2006. "Earnings Manipulation, Pension Assumptions, and Managerial Investment Decisions," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 157-195, 02.
- Deborah Lucas, 2007. "Valuing & Hedging: Defined Benefit Pension Obligations - The Role of Stocks Revisited," Money Macro and Finance (MMF) Research Group Conference 2006 169, Money Macro and Finance Research Group.
- Mitchell, Olivia S & Smith, Robert S, 1994.
"Pension Funding in the Public Sector,"
The Review of Economics and Statistics,
MIT Press, vol. 76(2), pages 278-90, May.
- Joshua D. Rauh, 2006. "Investment and Financing Constraints: Evidence from the Funding of Corporate Pension Plans," Journal of Finance, American Finance Association, vol. 61(1), pages 33-71, 02.
- Vincent Touzé, 2010.
"Le système de retraite américain : impact de la crise et tendances de long terme,"
Documents de Travail de l'OFCE
2010-27, Observatoire Francais des Conjonctures Economiques (OFCE).
- Vincent Touze, 2010. "Le système de retraite américain : impact de la crise et tendances de long terme," Sciences Po publications 2010-27, Sciences Po.
- Javed I. Ahmed & Brad M. Barber & Terrance Odean, 2013. "Made poorer by choice: worker outcomes in Social Security v. private retirement accounts," Finance and Economics Discussion Series 2013-23, Board of Governors of the Federal Reserve System (U.S.).
- Alexandre Laurin & William B.P. Robson, 2009. "Supersized Superannuation: The Startling Fair-Value Cost of Federal Government Pensions," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 122, December.
- David G. Lenze, 2009. "Accrual Measures of Pension-Related Compensation and Wealth of State and Local Government Workers," BEA Working Papers 0054, Bureau of Economic Analysis.
- Catherine Mathieu & Vincent Touze & Henri Sterdyniak & Gerard Cornilleau, 2010.
"Les réformes des retraites en Europe dans la crise,"
Sciences Po publications
2010-17, Sciences Po.
- Gérard Cornilleau & Catherine Mathieu & Henri Sterdyniak & Vincent Touzé, 2010. "Les réformes des retraites en Europe dans la crise," Documents de Travail de l'OFCE 2010-17, Observatoire Francais des Conjonctures Economiques (OFCE).
- Ponds, E.H.M. & Severinson, C. & Yermo, J., 2012. "Implicit debt in public sector plans: An international comparison," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5452874, Tilburg University.
- Raimond Maurer & Olivia S. Mitchell & Ralph Rogalla, 2008.
"Managing Contribution and Capital Market Risk in a Funded Public Defined Benefit Plan: Impact of CVaR Cost Constraints,"
NBER Working Papers
14332, National Bureau of Economic Research, Inc.
- Maurer, Raimond & Mitchell, Olivia S. & Rogalla, Ralph, 2009. "Managing contribution and capital market risk in a funded public defined benefit plan: Impact of CVaR cost constraints," Insurance: Mathematics and Economics, Elsevier, vol. 45(1), pages 25-34, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.