Management of Retirement Funds by Republican vs. Democrat States: Understanding the Differences

27 Pages Posted: 19 Apr 2023

See all articles by Mustafa Onur Caglayan

Mustafa Onur Caglayan

Florida International University

Edward R. Lawrence

Florida International University (FIU) - Department of Finance

Robinson Reyes-Peña

Florida International University

Date Written: April 9, 2023

Abstract

As most of the state pensions in the USA deal with their respective funding crisis, we compare the management approaches undertaken by funds located in the states that are governed by Republicans vis-à-vis funds that are located in states governed by Democrats. We find that pension funds located in states governed by Republicans display a lower funding ratio compared to the pension funds located in states governed by Democrats. The lower funding ratio of pension funds located in Republican-governed states is explained by their choice of lower contributions, higher benefits, and a lower return assumption.

Keywords: state pension funds, funding shortfall, investment risk, politics

JEL Classification: D72, G23, G11, H79

Suggested Citation

Caglayan, Mustafa Onur and Lawrence, Edward R. and Reyes-Peña, Robinson, Management of Retirement Funds by Republican vs. Democrat States: Understanding the Differences (April 9, 2023). Available at SSRN: https://ssrn.com/abstract=4414386 or http://dx.doi.org/10.2139/ssrn.4414386

Mustafa Onur Caglayan

Florida International University ( email )

Miami, FL

Edward R. Lawrence

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Robinson Reyes-Peña (Contact Author)

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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