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Pension Funding in the Public Sector

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  • Mitchell, Olivia S
  • Smith, Robert S

Abstract

This paper explores the determinants of pension funding in the public sector. We formulate and test several hypotheses about the determinants of public employer pension funding practices, using a new data set describing financial and other characteristics of state, local, and teacher plans. The data show that, on average, public sector pension plans were relatively well-funded during the late 1980s. There were, however, wide variations in funding practices in our sample. Our analysis of these variations suggests that past funding practice tends to be perpetuated, that unionized employers are less likely to fully fund future pension obligations, and that funding is sensitive to fiscal pressure. Copyright 1994 by MIT Press.

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  • 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.
    • Handle: RePEc:tpr:restat:v:76:y:1994:i:2:p:278-90
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    1. Ehrenberg, Ronald G. & Schwarz, Joshua L., 1987. "Public-sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 22, pages 1219-1260, Elsevier.
    2. Montgomery, Edward & Shaw, Kathryn & Benedict, Mary Ellen, 1992. "Pensions and Wages: An Hedonic Price Theory Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 111-128, February.
    3. Simon, Julian L, 1990. "Great and Almost-Great Magnitudes in Economics," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 149-156, Winter.
    4. Kotlikoff, Laurence J. & Smith, Daniel E., 1984. "Pensions in the American Economy," National Bureau of Economic Research Books, University of Chicago Press, number 9780226451466, Febrero.
    5. Robert P. Inman & David J. Albright, 1987. "Central Policies for Local Debt: The Case of Teacher Pensions," NBER Working Papers 2166, National Bureau of Economic Research, Inc.
    6. Robert P. Inman, 1985. "The Funding Status of Teacher Pensions: An Econometric Approach," NBER Working Papers 1727, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Paul Klumpes, 2000. "Incentives and disincentives for voluntary disclosure by pension funds: international evidence," Accounting and Business Research, Taylor & Francis Journals, vol. 30(4), pages 287-298.
    2. Mitchell, Olivia S., 1993. "Publicpension governance and performance : lessons for developing countries," Policy Research Working Paper Series 1199, The World Bank.
    3. Robert Novy-Marx & Joshua D. Rauh, 2008. "The Intergenerational Transfer of Public Pension Promises," NBER Working Papers 14343, National Bureau of Economic Research, Inc.
    4. Gang Chen & David S. T. Matkin, 2017. "Actuarial Inputs and the Valuation Of Public Pension Liabilities and Contribution Requirements: A Simulation Approach," Public Budgeting & Finance, Wiley Blackwell, vol. 37(1), pages 68-87, March.
    5. Mohan, Nancy & Zhang, Ting, 2014. "An analysis of risk-taking behavior for public defined benefit pension plans," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 403-419.
    6. Olivia S. Mitchell, 1998. "Administrative Costs in Public and Private Retirement Systems," NBER Chapters, in: Privatizing Social Security, pages 403-456, National Bureau of Economic Research, Inc.
    7. Marguerite Schneider, 2000. "When Financial Intermediaries are Corporate Owners: An Agency Model of Institutional Ownership," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 4(3), pages 207-237, September.
    8. Christian Dippel, 2019. "Political Parties Do Matter in U.S. Cities ... For Their Unfunded Pensions," NBER Working Papers 25601, National Bureau of Economic Research, Inc.
    9. Splinter, David, 2017. "State pension contributions and fiscal stress," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(1), pages 65-80, January.
    10. Arrau, Patricio & Schmidt-Hebbel, Klaus, 1995. "Pensions systems and reform : country experiences and research issues," Policy Research Working Paper Series 1470, The World Bank.
    11. An, Heng & Huang, Zhaodan & Zhang, Ting, 2013. "What determines corporate pension fund risk-taking strategy?," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 597-613.
    12. Olivia S. Mitchell & Roderick Carr, "undated". "State and Local Pension Plans," Pension Research Council Working Papers 95-13, Wharton School Pension Research Council, University of Pennsylvania.
    13. John A. Dove & Courtney A. Collins & Daniel J. Smith, 2018. "The impact of public pension board of trustee composition on state bond ratings," Economics of Governance, Springer, vol. 19(1), pages 51-73, February.
    14. Olivia S. Mitchell, "undated". "International Models for Pension Reform," Pension Research Council Working Papers 98-5, Wharton School Pension Research Council, University of Pennsylvania.
    15. Olivia S. Mitchell & David McCarthy & Stanley C. Wisniewski & Paul Zorn, "undated". "Developments in State and Local Pension Plans," Pension Research Council Working Papers 99-4, Wharton School Pension Research Council, University of Pennsylvania.
    16. Anzia, Sarah F. & Moe, Terry M., 2016. "Interest Groups on the Inside: The Governance of Public Pension Funds," Institute for Research on Labor and Employment, Working Paper Series qt8c82g4hf, Institute of Industrial Relations, UC Berkeley.
    17. Paul J.M. Klumpes & Mark Whittington, 2003. "Determinants of Actuarial Valuation Method Changes for Pension Funding and Reporting: Evidence from the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(1‐2), pages 175-204, January.
    18. Tim V. Eaton & John R. Nofsinger & Abhishek Varma, 2014. "Institutional Investor Ownership and Corporate Pension Transparency," Financial Management, Financial Management Association International, vol. 43(3), pages 603-630, September.
    19. Jeffrey Diebold & Vincent Reitano & Bruce McDonald, 2018. "Sweat The Small Stuff: Strategic Selection Of Pension Policies Used To Defer Required Contributions," Contemporary Economic Policy, Western Economic Association International, vol. 36(3), pages 505-525, July.
    20. Bernardo P. Schettini & Rafael Terra, 2020. "Electoral incentives and Public Employees’ Retirement Systems in Brazilian municipalities," Public Choice, Springer, vol. 184(1), pages 79-103, July.
    21. Dashle Kelley, 2014. "The political economy of unfunded public pension liabilities," Public Choice, Springer, vol. 158(1), pages 21-38, January.

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