The Economic Burden of Pension Shortfalls: Evidence from House Prices
By Darren Aiello, Asaf Bernstein, Mahyar Kargar, Ryan Lewis & Michael Schwert U.S. state pensions are underfunded by trillions of dollars, but their economic burden is unclear. In a model of inefficient taxation, real estate fully reflects the cost of pension shortfalls when it is the only form of immobile capital. We study the effect of pension shortfalls on real estate values at state borders, where labor and physical capital could more easily relocate to a state with a smaller...