Hostname: page-component-8448b6f56d-t5pn6 Total loading time: 0 Render date: 2024-04-19T09:20:40.724Z Has data issue: false hasContentIssue false
  • English
  • Français

The economics of state and local pensions

Published online by Cambridge University Press:  12 April 2011

JEFFREY R. BROWN ,
ROBERT CLARK  and
JOSHUA RAUH
JEFFREY R. BROWN
Affiliation:
University of Illinois at Urbana-Champaign, 515 East Gregory Drive, Champaign, IL 61820, and NBER (e-mail: brownjr@illinois.edu)
ROBERT CLARK
Affiliation:
Poole College of Management, North Carolina State University, Box 7229, Raleigh, NC 27695 (e-mail: robert_clark@ncsu.edu)
JOSHUA RAUH
Affiliation:
Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208, and NBER (e-mail: joshua-rauh@kellogg.northwestern.edu)
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper provides an overview of an economics-based perspective on the financial aspects of state and local public pensions in the U.S. Drawing on the research commissioned for an NBER research program on this topic, we discuss the large degree to which public pension liabilities exceed the assets set aside to fund them. We summarize issues related to the optimality of pre-funding, portfolio allocation, the discounting of liabilities, as well as how plans operate in practice. We also lay out an agenda for future research related to financial aspects of public pensions, retiree health plans for public employees, as well as issues related to plan design and labor market outcomes.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 10 , Issue 2 , April 2011 , pp. 161 - 172
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Beshears, John, James, Choi, David, Laibson, and Brigitte, Madrian (2011) Behavior economics perspective on public sector pension plans. Journal of Pension Economics and Finance, 10(2): 315–336.CrossRefGoogle ScholarPubMed
Black, F. (1989) Should you use stocks to hedge your pension liability? Financial Analysts Journal, 45(1): 10–12.Google Scholar
Bodie, Zvi (1990) The ABO, the PBO, and pension investment policy. Financial Analysts Journal, 46(5): 27–34.CrossRefGoogle Scholar
Bohn, Hening (2011) Should public retirement plans be fully funded? Journal of Pension Economics and Finance, 10(2): 195–219.CrossRefGoogle Scholar
Brown, J. R. (2008) Guaranteed trouble: The economic effects of the pension benefit guarantee corporation. Journal of Economic Perspectives, 22(1): 177–198.CrossRefGoogle Scholar
Brown, Jeffrey and Wilcox, David (2009) Discounting state and local pension liabilities. American Economic Review, 99(2): 538–542.CrossRefGoogle Scholar
Center on Budget and Policy Priorities (2011) Misunderstandings Regarding State Debt, Pensions, and Retiree Health Costs Create Unnecessary Alarm. Available online at http://www.cbpp.org/cms/index.cfm?fa=view&id=3372.Google Scholar
Clark, Robert, Craig, Lee and Sabelhaus, John (2011) State and Local Retirement Plans in the United States. Northampton, MA: Edward Elgar Publishing, forthcoming.CrossRefGoogle Scholar
Clark, Robert and Morrill, Melinda (2010) Retiree Health Plans in the Public Sector: Is There a Funding Crisis? Northampton, MA: Edward Elgar Publishing.CrossRefGoogle Scholar
Clark, Robert and Melinda, Morrill (2011) The funding status of retiree health plans in the public sector. Journal of Pension Economics and Finance, 10(2): 291–314.CrossRefGoogle Scholar
Feldstein, M. (1974) Social Security, induced retirement and aggregate capital accumulation. Journal of Political Economy, 82, 905–926.CrossRefGoogle Scholar
Feldstein, Martin and Liebman, Jeffrey (2002) Social Security. In Auerbach, Alan and Feldstein, Martin (eds), Handbook of Public Economics, Vol. 4. Elsevier Science, pp. 2245–2326.Google Scholar
Friedberg, Leora (2011) Labor Market Aspects of State and Local Retirement Plans: A review of evidence and a blueprint for future research. Journal of Pension Economics and Finance, 10(2): 337–361.CrossRefGoogle Scholar
Lucas, Deborah and Zeldes, Stephen P. (2006) Valuing and Hedging Defined Benefit Pension Obligations: The Role of Stocks Revisited. Mimeo: Columbia University Graduate School of Business.Google Scholar
Lucas, Deborah and Zeldes, Stephen P. (2009) How should public plans invest? American Economic Review, 99(2): 527–532.CrossRefGoogle Scholar
Munnell, Alicia, Jean-Pierre, Aubry, and Laura, Quinby (2011) Public pension funding in practice. Journal of Pension Economics and Finance, 10(2): 247–268.CrossRefGoogle Scholar
Novy-Marx, Robert, and Rauh, Joshua D. (2009) The risks and liabilities of state sponsored pension plans. Journal of Economic Perspectives, 23(4): 191–210.CrossRefGoogle Scholar
Novy-Marx, Robert and Rauh, Joshua D. (2011) Public pension promises: how big are they and what are they worth? Journal of Finance, forthcoming.CrossRefGoogle Scholar
Pennacchi, George and Mahdi, Rastad (2011) Portfolio allocation for public pension funds. Journal of Pension Economics and Finance, 10(2): 221–245.CrossRefGoogle Scholar
Ricardo, D. (1820) Essay on the Funding System. Supplement to the Encyclopaedia Brittanica, Supplement 6, United Kingdom.Google Scholar
Samuelson, P. (1958) An exact consumption loan model of interest with or without the social contrivance of money. Journal of Political Economy, 66, 467–482.CrossRefGoogle Scholar
Schieber, Sylvester J. (2011) Political economy of public sector retirement plans. Journal of Pension Economics and Finance, 10(2): 269–290.CrossRefGoogle Scholar