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Political Parties Do Matter in US Cities . . . for Their Unfunded Pensions

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  • Christian Dippel

Abstract

This paper studies public sector pension obligations, the biggest fiscal challenge currently facing many US cities. Employing a regression discontinuity design around close elections, benefit payments out of a city's public sector pensions are shown to grow faster under Democratic party mayors, while contributions into the pensions do not. Previous research showed that parties do not matter for a wide range of cities' fiscal expenditures and explained this with voters imposing fiscal discipline. This paper replicates previous results but shows that parties can matter for shrouded expenditure types that voters do not pay attention to, especially if they benefit well-organized interest groups.

Suggested Citation

  • Christian Dippel, 2022. "Political Parties Do Matter in US Cities . . . for Their Unfunded Pensions," American Economic Journal: Economic Policy, American Economic Association, vol. 14(3), pages 33-54, August.
    • Handle: RePEc:aea:aejpol:v:14:y:2022:i:3:p:33-54
    DOI: 10.1257/pol.20190480
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    References listed on IDEAS

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    1. Fernando Ferreira & Joseph Gyourko, 2009. "Do Political Parties Matter? Evidence from U.S. Cities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 399-422.
    2. Robert C. MacKay, 2014. "Implicit Debt Capitalization in Local Housing Prices: An Example of Unfunded Pension Liabilities," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 77-112, March.
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    6. Jeffrey Brinkman & Daniele Coen-Pirani & Holger Sieg, 2018. "The Political Economy of Municipal Pension Funding," American Economic Journal: Macroeconomics, American Economic Association, vol. 10(3), pages 215-246, July.
    7. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
    8. Matias D. Cattaneo & Nicolas Idrobo & Rocio Titiunik, 2019. "A Practical Introduction to Regression Discontinuity Designs: Foundations," Papers 1911.09511, arXiv.org.
    9. Glaeser, Edward L. & Ponzetto, Giacomo A.M., 2014. "Shrouded costs of government: The political economy of state and local public pensions," Journal of Public Economics, Elsevier, vol. 116(C), pages 89-105.
    10. Inman, Robert P., 1982. "Public employee pensions and the local labor budget," Journal of Public Economics, Elsevier, vol. 19(1), pages 49-71, October.
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    3. Luisa Dörr & Niklas Potrafke & Felix Roesel & Luisa Dörr, 2021. "Populists in Power," CESifo Working Paper Series 9336, CESifo.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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