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The effects of political competition on the generosity of public-sector pension plans

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  • Bagchi, Sutirtha

Abstract

In politically competitive jurisdictions, there can be strong electoral incentives to increase the generosity of public pensions and simultaneously, to not fund them fully, in order to keep taxes low. I examine the relationship between political competition and generosity of public pensions using a panel dataset for 3000 local plans from Pennsylvania for the period 2003–2013. I find that as the level of political competition in a municipality increases, pension plans become more generous but this relationship holds true only for plans run by municipal governments. A one standard deviation increase in the level of political competition is associated with an increase in the generosity of municipal plans by about 3 percent ($340–504/ retiree/ year) with no effect on plans run by municipal authorities. The effects of political competition are driven by municipalities that have a higher proportion of uninformed voters and are absent for defined contribution plans.

Suggested Citation

  • Bagchi, Sutirtha, 2019. "The effects of political competition on the generosity of public-sector pension plans," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 439-468.
  • Handle: RePEc:eee:jeborg:v:164:y:2019:i:c:p:439-468
    DOI: 10.1016/j.jebo.2019.06.014
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    More about this item

    Keywords

    Public-sector pensions; Political competition; Generosity of benefits; Defined benefit pensions; Defined contribution pensions;

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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