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Training and Pensions: Substitutes or Complements?

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  • Ghilarducci, Teresa
  • Reich, Michael

Abstract

We compare firm-optimizing and institutional models of labor contracts to investigate how certain types of pension plans affect training. Unlike previous studies, we consider an expanded voice model of training and pension coverage in which worker and union preferences feed back upon firm decisions and we test for this bi-directional causality between pensions and training. The data consist of merged 1991 CPS samples, using the January training supplement and the March and April files, which contain information on pension coverage and union membership. When pension coverage is treated as endogenous in a two-stage least squares regression, pensions have a negative effect upon training, and they can be viewed as substitutes. This finding is inconsistent with the standard view that firms optimize training expenditures by providing pensions. In contrast, when pension coverage is in a defined benefit multiemployer plan, training and pensions are complements, consistent with both optimizing and institutional models.

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Bibliographic Info

Paper provided by Institute of Industrial Relations, UC Berkeley in its series Institute for Research on Labor and Employment, Working Paper Series with number qt2xq878qt.

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Date of creation: 03 Apr 1998
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Handle: RePEc:cdl:indrel:qt2xq878qt

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  1. Alan S. Blinder, 1982. "Private Pensions and Public Pensions: Theory and Fact," NBER Working Papers 0902, National Bureau of Economic Research, Inc.
  2. Lisa M Lynch & Sandra E Black, 2002. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," Working Papers 02-04, Center for Economic Studies, U.S. Census Bureau.
  3. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
  4. William E. Even & David A. Macpherson, 1996. "Employer size and labor turnover: The role of pensions," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 49(4), pages 707-728, July.
  5. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  6. Johnson, Richard W, 1996. "The Impact of Human Capital Investments on Pension Benefits," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 520-54, July.
  7. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538.
  8. Alan L. Gustman & Thomas L. Steinmeier & Olivia Mitchell, 1994. "The role of pensions in the labor market: A survey of the literature," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(3), pages 417-438, April.
  9. Valletta, Robert G, 1999. "Declining Job Security," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages S170-97, October.
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