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Private Pensions as Corporate Debt

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  • Martin Feldstein

Abstract

This paper begins by examining the ways in which pension liabilities are and are not like corporate bonds. Some conceptual issues involved in valuing future pension obligations are then discussed. The second section considers the advantage to firms of fully funding their pension obligations and the reasons why many firms nevertheless choose to have unfunded obligations. The third section then summarizes the results of research on the effect of unfunded pension liabilities on the equity value of firms. The first three sections thus consider the role of pensions at the level of the individual firm. The two sections that follow focus on the current and future role of pensions in the national economy. More specifically, section 4 examines the effect of private pensions on the nation's saving rate, paying special attention to the implication of unfunded pension obligations. The fifth section then discusses the impact of inflation on the private pension system and the likely future for indexed and unindexed private pensions.

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File URL: http://www.nber.org/papers/w0703.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0703.

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Date of creation: Jul 1982
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Publication status: published as Feldstein, Martin. "Private Pensions as Corporate Debt." The Changing Rolesof Debt and Equity in Financing U.S. Capital Formation, edited by Benjamin M. Friedman, pp. 75-90. Chicago: University of Chicago Press, 1982.
Handle: RePEc:nbr:nberwo:0703

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  1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  2. Feldstein, Martin & Seligman, Stephanie, 1981. "Pension Funding, Share Prices, and National Savings," Journal of Finance, American Finance Association, vol. 36(4), pages 801-24, September.
  3. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  4. Feldstein, Martin, 1978. "Do private pensions increase national savings?," Journal of Public Economics, Elsevier, vol. 10(3), pages 277-293, December.
  5. Zvi Bodie, 1980. "Purchasing-Power Annuities: Financial Innovation for Stable Real Retirement Income in an Inflationary Environment," NBER Working Papers 0442, National Bureau of Economic Research, Inc.
  6. Feldstein, Martin, 1981. "Private Pensions and Inflation," American Economic Review, American Economic Association, vol. 71(2), pages 424-28, May.
  7. Martin S. Feldstein & Daniel R. Feenberg, 1983. "Alternative Tax Rules and Personal Saving Incentives: Microeconomic Data and Behavioral Simulations," NBER Chapters, in: Behavioral Simulation Methods in Tax Policy Analysis, pages 173-210 National Bureau of Economic Research, Inc.
  8. Martin Feldstein & James M. Poterba, 1980. "State and Local Taxes and the Rate of Return on Nonfinancial Corporate Capital (revised as W0740)," NBER Working Papers 0508, National Bureau of Economic Research, Inc.
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Cited by:
  1. Martin Feldstein, 1981. "Should Private Pensions Be Indexed?," NBER Working Papers 0787, National Bureau of Economic Research, Inc.
  2. Zvi Bodie, 1988. "Pension Fund Investment Policy," NBER Working Papers 2752, National Bureau of Economic Research, Inc.

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