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A Three-Part Literature Review

Proposition 2½ Overrides, the Efficiency of Public Goods Provision, and the Capitalization of Unfunded Pension Obligations

Jeffrey Zabel

July 2014, English


This is a literature review covering three areas related to a forthcoming study entitled “Massachusetts Proposition 2½ Overrides as Voluntary Taxes: Do Residents Get What They Want or Do They Only Get What They Need?”: 1) Proposition 2½, 2) the efficiency of public goods provision, and, because some of the override elections are for pension payments, 3) the capitalization of unfunded pension obligations. There is little evidence in the third area. Future studies should include data on pension liabilities at the jurisdiction level merged with transaction-level data on house prices. The most convincing evidence will come from difference-in-difference analyses where identification is based on within-jurisdiction changes in unfunded pension liabilities. The question remains as to whether there are enough (exogenous) changes in unfunded pension liabilities to provide precise estimates of their impact on house prices.