Public pension shortfalls and state economic growth: a preliminary examination

Charles Steindel

Business Economics, 2020, vol. 55, issue 3, No 7, 138-149

Abstract: Abstract Public pension funding problems may contribute to a state's poor economic performance. This paper examines that proposition, using state-level data on public pensions developed by the Pew Trust, and jointly by the Federal Reserve Board and the Bureau of Economic Analysis. There is little evidence that measures of the level of unfunded pension plan liabilities lead directly to a state's soft economic performance, though growth in unfunded liabilities appear to be associated with lower growth. While these results suggest that reductions in the growth of a state's pension debt may be beneficial, they arguably do not imply that dramatic action to reduce liabilities is necessarily called for. In that regard, the implications are comparable to those of Lenney et al. (2019), that suggest that reasonable goals for some presumed highly troubled systems are stabilization of the ratio of their unfunded liabilities to their state's nominal GDP, rather than outright elimination of the debt.

Keywords: Pensions; State finances; Economic growth; Unfunded liabilities (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1057/s11369-020-00183-3

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