The Marginal Value of Public Pension Wealth: Evidence From Border House Prices

72 Pages Posted: 9 Mar 2021 Last revised: 26 Mar 2024

See all articles by Darren Aiello

Darren Aiello

Brigham Young University

Asaf Bernstein

University of Colorado at Boulder; National Bureau of Economic Research (NBER)

Mahyar Kargar

University of Illinois at Urbana-Champaign

Ryan Lewis

University of Colorado, Boulder

Michael Schwert

AQR Arbitrage, LLC

Date Written: November 4, 2019

Abstract

We study effects of state pension windfalls on property prices near state borders, where theory suggests real estate reflects the value of additional public resources. Windfalls have grown to half the size of total state tax revenues and provide plausibly well-identified variation in fiscal conditions. We find one dollar of exogenous variation in pension asset returns increases border house prices by approximately two dollars. These estimates suggest governments, rather than wasting incremental resources, allocate additional funds towards high value projects or tax abatement. Evidence of larger effects in financially constrained municipalities highlight how fiscal resources amplify welfare effects of economic shocks.

Keywords: Public finance, pensions, house prices

JEL Classification: G5, R3, H41, H55, H74

Suggested Citation

Aiello, Darren and Bernstein, Asaf and Kargar, Mahyar and Lewis, Ryan and Schwert, Michael, The Marginal Value of Public Pension Wealth: Evidence From Border House Prices (November 4, 2019). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper , Available at SSRN: https://ssrn.com/abstract=3757016 or http://dx.doi.org/10.2139/ssrn.3757016

Darren Aiello (Contact Author)

Brigham Young University ( email )

United States

HOME PAGE: http://darrenaiello.com

Asaf Bernstein

University of Colorado at Boulder ( email )

Campus Box 419
Boulder, CO 80309
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Mahyar Kargar

University of Illinois at Urbana-Champaign ( email )

HOME PAGE: http://mahyarkargar.com

Ryan Lewis

University of Colorado, Boulder ( email )

Boulder, CO 80309-0419
United States

Michael Schwert

AQR Arbitrage, LLC ( email )

Two Greenwich Plaza
Greenwich, CT 06830
United States
2037423005 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
387
Abstract Views
2,687
Rank
143,676
PlumX Metrics