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

Sutirtha Bagchi

No 38, 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 increase the generosity of public pensions and simultaneously, to not fund them fully, in order to keep taxes low. I examine the relationship between political competition and generosity of public pensions using a panel dataset for 3,000 municipal plans from Pennsylvania for the period 2003–2013. I find that as the level of political competition in a municipality increases, pension plans become more generous but this relationship holds true only for plans run by municipal governments. A one standard deviation increase in the level of political competition is associated with an increase in the generosity of municipal plans by about 3 percent ($426–507/retiree/year) with no effect on plans run by municipal authorities. The effects of political competition are driven by municipalities that have a higher proportion of uninformed voters and are absent for defined contribution plans.

Keywords: Public-sector pensions; Political competition; Generosity of benefits; Defined benefit pensions; Defined contribution pensions (search for similar items in EconPapers)
JEL-codes: H75 J45 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-age, nep-cdm and nep-pol
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Related works:
Journal Article: The effects of political competition on the generosity of public-sector pension plans (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:vil:papers:38

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