The Usefulness of the Wind-Up Measure of Pension Liabilities: A LabourMarket Perspective
AbstractFinancial economists have long favoured the use of a wind-up measure of the firm's pension liabilities. Yet the pension liabilities of the firm also represent the pension wealth of its workers. It is reasonable to presume that workers and shareholders have a common view of the pension contract. If the wind-up measure depicts the true pension liabilities of the firm, then the wage concession granted by its workers must reflect the fact that the firm may choose to terminate the plan at any time. Data on the wage-service characteristics of the membership of a sample of final earnings plans in Canada suggest,contrary to the implications of the wind-up measure, that workers' wages do not internalize accruing pension benefits on a year-to-year basis. Instead, the data suggest that pension plans may be a vehicle through which a significant portion of the total compensation of individual employees is deferred until their later work years, and that the wind-up measure may well understate the pension liabilities of an on-going firm.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1559.
Date of creation: Feb 1985
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Other versions of this item:
- Pesando, James E, 1985. " The Usefulness of the Wind-Up Measure of Pension Liabilities: A Labor Market Perspective," Journal of Finance, American Finance Association, vol. 40(3), pages 927-40, July.
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- James E. Pesando, 1981.
"Employee Valuation of Pension Claims and the Impact of Indexing Initiatives,"
NBER Working Papers
0767, National Bureau of Economic Research, Inc.
- Pesando, James E, 1984. "Employee Evaluation of Pension Claims and the Impact of Indexing Initiatives," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 1-17, January.
- Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987.
"How Does the Market Value Unfunded Pension Liabilities?,"
in: Issues in Pension Economics, pages 81-110
National Bureau of Economic Research, Inc.
- Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987. "How Does the Market Value Unfunded Pension Liabilities?," NBER Working Papers 1602, National Bureau of Economic Research, Inc.
- Bulow, Jeremy I, 1982. "What Are Corporate Pension Liabilities?," The Quarterly Journal of Economics, MIT Press, vol. 97(3), pages 435-52, August.
- David McCarthy, 2003. "A Lifecycle Analysis of Defined Benefit Pension Plans," Working Papers wp053, University of Michigan, Michigan Retirement Research Center.
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