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The Effects of Political Competition on the Funding of Public-Sector Pension Plans (Revised June 2020)

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Abstract

In politically competitive jurisdictions, there can be strong electoral incentives to underfund public pensions in order to keep current taxes low. I examine this hypothesis using panel data for over 2,000 local pension plans from Pennsylvania spanning the period 1985–2017. The results suggest that more politically competitive municipalities tend to have pension plans that are less funded. The effects of political competition are driven by municipalities that have a higher proportion of uninformed voters and are absent for pension plans offered by municipal authorities. The negative relationship between political competition and funding status is present for state pensions as well.

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  • Sutirtha Bagchi, 2017. "The Effects of Political Competition on the Funding of Public-Sector Pension Plans (Revised June 2020)," Villanova School of Business Department of Economics and Statistics Working Paper Series 36, Villanova School of Business Department of Economics and Statistics.
    • Handle: RePEc:vil:papers:36
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    File URL: http://repec.library.villanova.edu/workingpapers/VSBEcon36R1.pdf
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    1. 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.

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    More about this item

    Keywords

    Public-sector pensions; political competition; unfunded liabilities; actuarial funded ratio;
    All these keywords.

    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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