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The economics of state and local pensions


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.

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Robert Clark and Melinda Morrill (2010) Retiree Health Plans in the Public Sector: Is There a Funding Crisis? Northampton, MA: Edward Elgar Publishing.

Robert Clark and Morrill Melinda (2011) The funding status of retiree health plans in the public sector. Journal of Pension Economics and Finance, 10(2): 291314.

M. Feldstein (1974) Social Security, induced retirement and aggregate capital accumulation. Journal of Political Economy, 82, 905926.

Martin Feldstein and Jeffrey Liebman (2002) Social Security. In Alan Auerbach and Martin Feldstein (eds), Handbook of Public Economics, Vol. 4. Elsevier Science, pp. 22452326.

Robert Novy-Marx and Joshua D. Rauh (2011) Public pension promises: how big are they and what are they worth? Journal of Finance, forthcoming.

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Journal of Pension Economics & Finance
  • ISSN: 1474-7472
  • EISSN: 1475-3022
  • URL: /core/journals/journal-of-pension-economics-and-finance
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