This paper applies a public choice approach to the problem of unfunded pension liabilities and adopts the methodology of Congleton and Shughart (1990) to model underfunding of state-level public pension plans using the median voter theorem, along with the theory of “capture” by special interest groups, and a combined model of the two. With panel data from 2001 to 2009, the paper finds that the combined model provides the strongest explanation for the current levels of unfunded liabilities; hence, both median voter preferences and special interest group influence are affecting political outcomes. The special interest group model slightly outperforms the median voter model in direct comparisons.
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The author would like to thank Roger Congleton, William Shughart, and Russell Sobel for helpful suggestions, and thank Keith Brainard for providing data.
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Kelley, D.G. The political economy of unfunded public pension liabilities. Public Choice 158, 21–38 (2014). https://doi.org/10.1007/s11127-012-0049-3
- Public pensions
- Median voter theorem
- Special interest group theory
- Unfunded liabilities