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Pensions and Firm Performance

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  • Steven G. Allen
  • Robert L. Clark

Abstract

This paper examines how pension plans affect employee behavior and firm performance. Theoretically, the impact of pensions on firm performance cannot be predicted. Firms with pensions should have lower turnover rates and more efficient retirement decisions; their employees will be less likely to shirk. On the other hand, pension compensation is not very closely linked to worker performance and there is some risk that turnover may fall too much. The evidence indicates that although wages do not seem to fall with pension compensation, profit rates are not affected by pension coverage. This suggests that pension coverage is associated with higher productivity, a proposition that is supported by indirect evidence on pensions, turnover, and productivity but not by direct tests of how pension coverage and productivity are correlated.

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File URL: http://www.nber.org/papers/w2266.pdf
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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2266.

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Date of creation: May 1987
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Handle: RePEc:nbr:nberwo:2266

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References

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  1. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  2. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
  3. Smith, Robert Stewart, 1981. "Compensating Differentials for Pensions and Underfunding in the Public Sector," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 463-68, August.
  4. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987. "How Does the Market Value Unfunded Pension Liabilities?," NBER Chapters, in: Issues in Pension Economics, pages 81-110 National Bureau of Economic Research, Inc.
  5. Viscusi, W Kip, 1980. "Self-Selection, Learning-Induced Quits, and the Optimal Wage Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 529-46, October.
  6. Schiller, Bradley R & Weiss, Randall D, 1979. "The Impact of Private Pensions on Firm Attachment," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 369-80, August.
  7. Steven G. Allen & Robert L. Clark, 1985. "Unions, Pension Wealth, and Age-Compensation Profiles," NBER Working Papers 1677, National Bureau of Economic Research, Inc.
  8. Olivia S. Mitchell, 1983. "Fringe benefits and the cost of changing jobs," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 37(1), pages 70-78, October.
  9. Steven G. Allen, 1981. "Compensation, safety, and absenteeism: Evidence from the paper industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(2), pages 207-218, January.
  10. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1984. "Post-Retirement Adjustments of Pension Benefits," NBER Working Papers 1364, National Bureau of Economic Research, Inc.
  11. Edward P. Lazear, 1983. "Pensions as Severance Pay," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 57-90 National Bureau of Economic Research, Inc.
  12. Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1, October.
  13. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1986. "Postretirement Adjustments of Pension Benefits," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 118-137.
  14. Olivia S. Mitchell & Gary S. Fields, 1981. "The Effects of Pensions and Earnings on Retirement: A Review Essay," NBER Working Papers 0772, National Bureau of Economic Research, Inc.
  15. Bulow, Jeremy I, 1982. "What Are Corporate Pension Liabilities?," The Quarterly Journal of Economics, MIT Press, vol. 97(3), pages 435-52, August.
  16. Martin Feldstein & Stephanie Seligman, 1981. "Pension Funding, Share Prices, and National Saving," NBER Working Papers 0509, National Bureau of Economic Research, Inc.
  17. Ippolito, Richard A, 1985. "The Labor Contract and True Economic Pension Liabilities," American Economic Review, American Economic Association, vol. 75(5), pages 1031-43, December.
  18. Timothy Smeeding, 1983. "The Size Distribution of Wage and Nonwage Compensation: Employer Cost versus Employee Value," NBER Chapters, in: The Measurement of Labor Cost, pages 237-286 National Bureau of Economic Research, Inc.
  19. Martin Feldstein & Randall Morck, 1985. "Pension Funding Decisions, Interest Rate Assumptions and Share Prices," NBER Working Papers 0938, National Bureau of Economic Research, Inc.
  20. Robert S. Smith & Ronald G. Ehrenberg, 1981. "Estimating Wage-Fringe Trade-Offs: Some Data Problems," NBER Working Papers 0827, National Bureau of Economic Research, Inc.
  21. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-78, June.
  22. Edward P. Lazear, 1983. "Incentive Effects of Pensions," NBER Working Papers 1126, National Bureau of Economic Research, Inc.
  23. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
  24. Clark,Robert L. & Spengler,Joseph J., 1980. "The Economics of Individual and Population Aging," Cambridge Books, Cambridge University Press, number 9780521297028, November.
  25. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
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Citations

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Cited by:
  1. Alan L. Gustman & Thomas L. Steinmeier, 1987. "Pensions, Efficiency Wages, and Job Mobility," NBER Working Papers 2426, National Bureau of Economic Research, Inc.
  2. Montgomery, Edward & Shaw, Kathryn & Benedict, Mary Ellen, 1992. "Pensions and Wages: An Hedonic Price Theory Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 111-28, February.
  3. Bernheim, B. Douglas, 2002. "Taxation and saving," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 18, pages 1173-1249 Elsevier.
  4. Olivia S. Mitchell, 1993. "Retirement Systems in Developed and Developing Countries: Institutional Features, Economic Effects, and Lessons for Economies in Transition," NBER Working Papers 4424, National Bureau of Economic Research, Inc.
  5. Robert L. Clark & Joseph F. Quinn, 1999. "Effects of Pensions on Labor Markets and Retirement," Boston College Working Papers in Economics 431, Boston College Department of Economics.

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