The Economics of State and Local Public Pensions

Jeffrey R. Brown, Robert Clark, Joshua Rauh

NBER Working Paper No. 16792
Issued in February 2011
NBER Program(s):Aging, Public Economics

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.

A non-technical summary of this paper is available in the 2011 number 1 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w16792

Published: “The Economics of State and Local Pensions.” Journal of Pension Economics and Finance. Vol . 10(2): pages 161 - 172. April 2011. With Robert Clark and Joshua Rauh.

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