Public Choice Economics and Public Pension Plan Funding

Abstract

Public choice theory (PCT) assumes that elected officials and public administrators act in their self-interest, not in the public interest. This article tests the theory regarding the effects of public governance on U.S. public pension plans, which are increasingly important socioeconomic institutions. The authors develop several PCT-based hypotheses regarding the dependent variable of plan funding, a measure of plan performance. Data sources include biennial PENDAT survey data for 1992-1996. The results indicate limited support for PCT. A positive relationship between the presence of boards of trustees and plan funding is found, but no relationship between citizen voting and plan funding.