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The Funding Status of Teacher Pensions: An Econometric Approach

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  • Robert P. Inman

Abstract

The financing of public employee pensions has become an issue of growing public concern. This paper examines the fundinq status of teacher pension plans for the fifty states and for selected localities for the decade, 1971-1980. A pension underfunding equation based upon actuarial principles is specified and estimated using a sample of pension plans for which actuarially sound measures of underfundings are available. The ecometrically-estimated pension equationis then used to "predict" underfundings for each state and local pension plan for each year for which full pension plan data are available. The results reveal that the real dollar value of plan underfundings has risen by over 50% in the average state from 1971-1980. Strategies for funding these growing pension deficits are required.

Suggested Citation

  • Robert P. Inman, 1985. "The Funding Status of Teacher Pensions: An Econometric Approach," NBER Working Papers 1727, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1727
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    References listed on IDEAS

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    1. Robert C. Merton, 1981. "On the Role of Social Security as a Means for Efficient Risk-Bearing in an Economy Where Human Capital Is Not Tradeable," NBER Working Papers 0743, National Bureau of Economic Research, Inc.
    2. Arnott, Richard J. & Gersovitz, Mark, 1980. "Corporate financial structure and the funding of private pension plans," Journal of Public Economics, Elsevier, vol. 13(2), pages 231-247, April.
    3. Samuelson, Paul A, 1975. "Optimum Social Security in a Life-Cycle Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(3), pages 539-544, October.
    4. Michael J. Boskin & John B. Shoven, 1984. "Concepts and Measures of Earnings Replacement During Retirement," NBER Working Papers 1360, National Bureau of Economic Research, Inc.
    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. Jeremy I. Bulow, 1982. "What are Corporate Pension Liabilities?," The Quarterly Journal of Economics, Oxford University Press, vol. 97(3), pages 435-452.
    7. Smith, Robert Stewart, 1981. "Compensating Differentials for Pensions and Underfunding in the Public Sector," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 463-468, August.
    8. Ehrenberg, Ronald G, 1980. "Correlates of Underfunding of Public Sector Retirement Systems," Economic Inquiry, Western Economic Association International, vol. 18(3), pages 493-500, July.
    9. Feldstein, Martin S, 1976. "Perceived Wealth in Bonds and Social Security: A Comment," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 331-336, April.
    10. Herman B. Leonard, 1984. "The Federal Civil Service Retirement System: An Analysis of its Financial Condition and Current Reform Proposals," NBER Working Papers 1258, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Boskin, Michael J. & Robinson, Marc S. & Huber, Alan M., 1987. "Government Saving, Capital Formation and Wealth in the United States, 1947-1985," CEPR Publications 244416, Stanford University, Center for Economic Policy Research.
    2. 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 278-290, May.

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