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The Effects of Political Competition on the Funding of Public-Sector Pension Plans

Sutirtha Bagchi ()

No 36, Villanova School of Business Department of Economics and Statistics Working Paper Series from Villanova School of Business Department of Economics and Statistics

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 2,000 municipal pension plans from Pennsylvania. The results suggest that as a municipality becomes more politically competitive, it tends to have pension plans that are less funded. The effects of political competition are driven by municipalities that have a higher proportion of less informed 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.

Keywords: Public-sector pensions; political competition; unfunded liabilities; actuarial funded ratio (search for similar items in EconPapers)
JEL-codes: H75 J45 (search for similar items in EconPapers)
Date: 2017-07
New Economics Papers: this item is included in nep-age, nep-cdm and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:vil:papers:36

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