The Political Economy of Underfunded Municipal Pension Plans

Jeffrey Brinkman, Daniele Coen-Pirani and Holger Sieg

No 22321, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the determinants of underfunding of local government's pension funds using a politico-economic overlapping generations model. We show that a binding downpayment constraint in the housing market dampens capitalization of future taxes into current land prices. Thus, a local government's pension funding policy matters for land prices and the utility of young households. Underfunding arises in equilibrium if the pension funding policy is set by the old generation. Young households instead favor a policy of full funding. Empirical results based on cross-city comparisons in the magnitude of unfunded liabilities are consistent with the predictions of the model.

JEL-codes: E6 H3 H7 R5 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-age, nep-mac, nep-pol and nep-ure
Note: AG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w22321.pdf (application/pdf)

Related works:
Working Paper: The Political Economy of Underfunded Municipal Pension Plans (2015)
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:nbr:nberwo:22321

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w22321

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().