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Explaining the Evolution of Pension Structure and Job Tenure

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  • Leora Friedberg
  • Michael Owyang

Abstract

Current and expected job tenure have fallen significantly over the last two decades. Over the same period, traditional defined benefit pensions, designed to reward long tenure, have become steadily less common. This paper uses a contract-theoretic matching model with moral hazard to explain changes in pension structure and job tenure. In our model, a decline in the value of existing jobs relative to new jobs reduces expected match duration and thus the appeal of DB pensions. We show that this explanation is consistent with observed trends and suggests an additional consequence of technological change that has not been closely studied.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10714.

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Date of creation: Aug 2004
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Handle: RePEc:nbr:nberwo:10714

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Cited by:
  1. Christian E. Weller, 2011. "What Does the Literature Tell Us About the Possible Effect of Changing Retirement Benefits on Public Employee Effectiveness?," Working Papers wp270, Political Economy Research Institute, University of Massachusetts at Amherst.
  2. Kandice Kapinos, 2009. "On the Determinants of Defined Benefit Pension Plan Conversions," Journal of Labor Research, Springer, Springer, vol. 30(2), pages 149-167, June.
  3. Leora Friedberg & Michael T. Owyang, 2004. "Explaining the evolution of pension structure and job tenure," Working Papers 2002-022, Federal Reserve Bank of St. Louis.
  4. Alicia H. Munnell & Kelly Haverstick & Geoffrey Sanzenbacher, 2006. "Job Tenure and Pension Coverage," Working Papers, Center for Retirement Research at Boston College wp2006-18, Center for Retirement Research, revised Oct 2006.
  5. Alicia H. Munnell & Dan Muldoon & Steven A. Sass, 2009. "Recessions and Older Workers," Issues in Brief ib2009-9-2, Center for Retirement Research, revised Jan 2009.
  6. Ann Huff Stevens, 2005. "The More Things Change, The More They Stay the Same: Trends in Long-term Employment in the United States, 1969-2002," NBER Working Papers 11878, National Bureau of Economic Research, Inc.
  7. Nicole Maestas & Julie Zissimopoulos, 2009. "How Longer Work Lives Ease the Crunch of Population Aging," Working Papers, RAND Corporation Publications Department 728, RAND Corporation Publications Department.
  8. Joshua Rauh & Irina Stefanescu & Stephen Zeldes, 2013. "Cost shifting and the freezing of corporate pension plans," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2013-82, Board of Governors of the Federal Reserve System (U.S.).
  9. Leora Friedberg & Michael T. Owyang & Tara M. Sinclair, 2006. "Searching for better prospects: endogenizing falling job tenure and private pension coverage," Working Papers 2003-038, Federal Reserve Bank of St. Louis.
  10. Cory Koedel & Michael Podgursky, 2011. "Teacher Pension Systems, the Composition of the Teaching Workforce, and Teacher Quality," Working Papers, Department of Economics, University of Missouri 1109, Department of Economics, University of Missouri, revised 10 Apr 2012.
  11. Leora Friedberg & Anthony Webb, 2003. "Retirement and the Evolution of Pension Structure," NBER Working Papers 9999, National Bureau of Economic Research, Inc.
  12. Niko Matouschek & Paolo Ramezzana, 2004. "Labor Market Frictions, Job Insecurity, and the Flexibility of the Employment Relationship," Econometric Society 2004 North American Summer Meetings 28, Econometric Society.
  13. Fred Robert-Nicoud (University of Geneva) & Niko Matouschek & Paolo Ramezzana (University of Virginia), 2004. "Labor Market Frictions, Job Insecurity and the Flexibility of the Employment Relationship," Econometric Society 2004 Australasian Meetings 52, Econometric Society.
  14. Leora Friedberg & Wei Sun & Anthony Webb, 2008. "What Effect Do Time Constraints Have on the Age of Retirement?," Working Papers, Center for Retirement Research at Boston College wp2008-17, Center for Retirement Research, revised Dec 2008.
  15. Kandice Kapinos, 2012. "Changes in Firm Pension Policy: Trends Away from Traditional Defined Benefit Plans," Journal of Labor Research, Springer, Springer, vol. 33(1), pages 91-103, March.
  16. Kandice Kapinos, 2011. "Changes in Firm Pension Policy: Trends Away from Traditional Defined Benefit Plans," Working Papers 11-36, Center for Economic Studies, U.S. Census Bureau.
  17. Kandice Kapinos, 2009. "On the Determinants of Defined Benefit Pension Plan Conversions," Journal of Economic Interaction and Coordination, Springer, vol. 30(2), pages 149-167, June.

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