The marginal value of public pension wealth: Evidence from border house prices

Abstract

We study how state pension windfalls affect property prices near state borders, where theory suggests real estate reflects the value of additional public resources. Windfalls, representing a source of state revenue about half the size of total taxes, provide economically significant and plausibly exogenous variation in fiscal conditions. We find that each dollar of pension asset returns increases border house prices by approximately two dollars, suggesting that governments allocate additional funds towards high-value projects or tax abatement rather than wasting incremental resources. Evidence of larger effects in financially constrained municipalities highlights how fiscal resources amplify welfare effects of economic shocks.