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Desperate Capital Breeds Productivity Loss: Evidence From Public Pension Investments in Private Equity

Author

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  • Vrinda Mittal

Abstract

I study investments of U.S. public pensions in private equity (PE), and trace them to ultimate micro assets—target firms which PE funds invest in, using micro-data on private investments combined with confidential U.S. Census data. I show that more severely underfunded public pensions receive lower average PE returns, and match with smaller GPs on average, than less underfunded pensions. Consistent with matching and returns, firms financed by most underfunded public pensions and smallest PE funds face labor productivity decreases. I introduce a novel instrument—public unionization—in support of underfunding positions driving selection into funds. Lastly, I evaluate alternate mechanisms.

Suggested Citation

  • Vrinda Mittal, 2026. "Desperate Capital Breeds Productivity Loss: Evidence From Public Pension Investments in Private Equity," Working Papers 26-47, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:26-47
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    File URL: https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-47.pdf
    File Function: First version, 2026
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    Keywords

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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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