The Trade-off Between Pension Costs and Salary Expenditures in the Public Sector

Dongwoo Kim, Cory Koedel and P. Xiang
Additional contact information
P. Xiang: Department of Economics at the University of Missouri, Columbia

No 1913, Working Papers from Department of Economics, University of Missouri

Abstract: We examine pension-cost crowd out of salary expenditures in the public sector using a 15-year data panel of state teacher pension plans spanning the Great Recession. While there is no evidence of salary crowd out prior to the Great Recession, there is a shift in the post-recession years such that a one percent (of salaries) increase in the annual required pension contribution corresponds to a decrease in total teacher salary expenditures of 0.24 percent. The effect operates through changes to the size of the teaching workforce, not changes to teacher wages. An explanation for the effect heterogeneity pre- and post-recession is that public employers are less able to shield the workforce from pension costs during times of fiscal stress. This problem is exacerbated because unlike other benefit costs, such as for health care, pension costs are countercyclical.

Keywords: pension costs; pension liabilities; unfunded pension liabilities; pension crowd-out; countercyclical pension costs (search for similar items in EconPapers)
JEL-codes: H75 I20 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2019-10-20
New Economics Papers: this item is included in nep-age and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://drive.google.com/file/d/1EUdd3TDYIcaFa0d07 ... vql/view?usp=sharing (application/pdf)

Related works:
Journal Article: The trade-off between pension costs and salary expenditures in the public sector (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1913

Access Statistics for this paper

More papers in Working Papers from Department of Economics, University of Missouri Contact information at EDIRC.
Bibliographic data for series maintained by Chao Gu ().