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Pensions and Indenture Premia

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  • Richard A. Ippolito
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    Abstract

    The implicit pension contract has provided a theoretical basis for the observed relation between pensions, less quitting and earlier retirement. But it also has encountered difficulty explaining why wages seem "too high" in pension firms. This anomaly has been taken by some to imply that efficiency wages, not pension capital losses, explain why quitting is abnormally low in defined benefit pensions. In this paper, I pursue an alternative explanation, that the implicit contract model is oversimplified because it ignores supply conditions facing long-tenure firms. I show that once an allowance is made for compensation required by workers for entering long-term labor contracts, numerous anomalous empirical observations in the pension market are explicable.

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    Bibliographic Info

    Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

    Volume (Year): 29 (1994)
    Issue (Month): 3 ()
    Pages: 795-812

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    Handle: RePEc:uwp:jhriss:v:29:y:1994:iii:1:p:795-812

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    Web page: http://jhr.uwpress.org/

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    Cited by:
    1. Robert L. Clark & Joseph F. Quinn, 1999. "Effects of Pensions on Labor Markets and Retirement," Boston College Working Papers in Economics, Boston College Department of Economics 431, Boston College Department of Economics.
    2. Anja Decressin & Julia Lane & Kristin McCue & Martha Stinson, 2005. "Employer-Provided Benefit Plans, Workforce Composition and Firm Outcomes," Longitudinal Employer-Household Dynamics Technical Papers, Center for Economic Studies, U.S. Census Bureau 2005-01, Center for Economic Studies, U.S. Census Bureau.
    3. Kayam, Saime S. & Parkın, Mehmet Koray & Çeliktopuz, Merih, 2013. "Features that influence the exit decision from the private pension system in Turkey," MPRA Paper 50933, University Library of Munich, Germany.
    4. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    5. Haynes, Jonathan B. & Sessions, John G., 2013. "Work now, pay later? An empirical analysis of the pension–pay trade off," Economic Modelling, Elsevier, Elsevier, vol. 30(C), pages 835-843.
    6. Leora Friedberg & Michael Owyang, 2004. "Explaining the Evolution of Pension Structure and Job Tenure," NBER Working Papers 10714, National Bureau of Economic Research, Inc.
    7. Barrientos, Armando, 1998. "Pension reform, personal pensions and gender differences in pension coverage," World Development, Elsevier, Elsevier, vol. 26(1), pages 125-137, January.

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