NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Political Parties Do Matter in U.S. Cities ... For Their Unfunded Pensions

Christian Dippel

NBER Working Paper No. 25601
Issued in February 2019, Revised in June 2019
NBER Program(s):Program on the Economics of Aging, Law and Economics Program, Public Economics Program, Political Economy Program

This paper studies the biggest fiscal challenge currently facing many U.S. cities, namely public-sector pension obligations. Employing a regression discontinuity design (RDD), it tests whether the mayor’s party impacts a city’s public-sector pensions. Pension benefits are shown to grow faster under Democratic-party mayors, while contribution payments simultaneously fall behind. Previous research showed that parties do not matter in U.S. cities for a wide range of fiscal expenditure types, purportedly because voters impose fiscal discipline. This paper shows that parties can matter when expenditures benefit a narrow interest group and are difficult to observe for tax payers.

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Document Object Identifier (DOI): 10.3386/w25601

  
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