Determinants of Government Under-Funded Public Pension Liabilities in the OECD

Posted: 3 Sep 2003


Under-funded government liabilities for public pensions constitutes a major expenditure in the management of social programmes in many countries, but to date has not attracted much attention from accountants as it does not easily fit within an accrual-based accounting system. This paper discusses major measurement problems associated with this liability and then examines determinants of variations in projected flow-based funding patterns among OECD governments. Alternative 'behavioural persistence' and 'regression to the mean' hypotheses about the determinants of under-funding practices are formulated and tested using an OECD data set describing the financial and socio-economic characteristics of government-sponsored public pension systems in these countries. Consistent with the behavioural persistence hypothesis, cross-sectional variations are found to be associated with the funding ratio and the rate of taxation required to keep government debt constant. Variations in under-funding practices across the sample are also sensitive to cultural differences in attitude towards public pension accountability between Continental European and Anglo-American countries.

Keywords: Public pension liabilities, under-funding

JEL Classification: M41, M48, J32

Suggested Citation

Klumpes, Paul J.M., Determinants of Government Under-Funded Public Pension Liabilities in the OECD. European Accounting Review, Vol. 12, No. 3, pp. 489-513, 2003. Available at SSRN:

Paul J.M. Klumpes (Contact Author)

Nottingham Trent University ( email )

Burton Street
Nottingham NG1 4BU, NG1 4LN
United Kingdom

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