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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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Publication status: published as Allen, Steven G. and Robert L. Clark. "Pensions and Firm Performance," Human Resources and Firm Performance, ed. by Morris Kleiner, et. al. Madison, WI: Industrial relations Research Association, 1987.
Handle: RePEc:nbr:nberwo:2266

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References

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  1. Richard B. Freeman, 1983. "Unions, Pensions, and Union Pension Funds," NBER Working Papers 1226, National Bureau of Economic Research, Inc.
  2. 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.
  3. Laurence J. Kotlikoff & David A. Wise, 1985. "Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual versus Spot Labor Markets," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 55-88 National Bureau of Economic Research, Inc.
  4. 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.
  5. Martin Feldstein & Randall Morck, 1983. "Pension Funding Decisions, Interest Rate Assumptions, and Share Prices," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 177-210 National Bureau of Economic Research, Inc.
  6. Edward P. Lazear, 1982. "Pensions as Severance Pay," NBER Working Papers 0944, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
  10. Robert S. Smith & Ronald G. Ehrenberg, 1983. "Estimating Wage-Fringe Trade-Offs: Some Data Problems," NBER Chapters, in: The Measurement of Labor Cost, pages 347-370 National Bureau of Economic Research, Inc.
  11. Edward P. Lazear, 1985. "Incentive Effects of Pensions," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 253-282 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, octubre-d.
  13. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  14. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1985. "How Does the Market Value Unfunded Pension Liabilities?," NBER Working Papers 1602, National Bureau of Economic Research, Inc.
  15. 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.
  16. 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.
  17. 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.
  18. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  19. Steven G. Allen & Robert L. Clark, 1985. "Unions, Pension Wealth, and Age-Compensation Profiles," NBER Working Papers 1677, National Bureau of Economic Research, Inc.
  20. 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.
  21. 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.
  22. 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.
  23. 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.
  24. 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.
  25. Clark,Robert L. & Spengler,Joseph J., 1980. "The Economics of Individual and Population Aging," Cambridge Books, Cambridge University Press, number 9780521297028, April.
  26. Bulow, Jeremy I, 1982. "What Are Corporate Pension Liabilities?," The Quarterly Journal of Economics, MIT Press, vol. 97(3), pages 435-52, August.
  27. 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.
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Cited by:
  1. Edward B. Montgomery & Kathryn Shaw & Mary Ellen Benedict, 1990. "Pensions and Wages: An Hedonic Price Theory Approach," NBER Working Papers 3458, National Bureau of Economic Research, Inc.
  2. B. Douglas Bernheim, 1999. "Taxation and Saving," NBER Working Papers 7061, National Bureau of Economic Research, Inc.
  3. 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.
  4. Olivia S. Mitchell, . "Retirement Systems in Developed and Developing Countries: Institutional Features, Economic Effects, and Lessons for Economies in Transition," Pension Research Council Working Papers 94-3, Wharton School Pension Research Council, University of Pennsylvania.
  5. Alan L. Gustman & Thomas L. Steinmeier, 1987. "Pensions, Efficiency Wages, and Job Mobility," NBER Working Papers 2426, National Bureau of Economic Research, Inc.

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