Working Paper: NBER ID: w25601
Authors: Christian Dippel
Abstract: 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.
Keywords: public sector pensions; political economy; regression discontinuity design; mayoral elections
JEL Codes: D72; D73; H7; H75; J5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Democratic mayor (H79) | annual per capita pension benefits (H55) |
| Republican mayor (H79) | annual per capita pension benefits (H55) |
| annual per capita pension benefits (H55) | lag on required contribution payments (J32) |
| Democratic mayor (H79) | pension benefits for police and firefighters (J32) |
| elections where challenger wins (D72) | pension benefits (H55) |