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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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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. Laurence J. Kotlikoff & David A. Wise, 1987. "Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual Versus Spot Labor Markets," NBER Working Papers 1290, National Bureau of Economic Research, Inc.
  2. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 86(3), pages 355-78, June.
  3. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(3), pages 486-507, June.
  4. 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.
  5. 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.
  6. Richard B. Freeman, 1983. "Unions, Pensions, and Union Pension Funds," NBER Working Papers 1226, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. 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.
  10. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, American Economic Association, vol. 71(4), pages 606-20, September.
  11. Ippolito, Richard A, 1985. "The Labor Contract and True Economic Pension Liabilities," American Economic Review, American Economic Association, American Economic Association, vol. 75(5), pages 1031-43, December.
  12. 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.
  13. 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.
  14. Bulow, Jeremy I, 1982. "What Are Corporate Pension Liabilities?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 97(3), pages 435-52, August.
  15. 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.
  16. 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.
  17. 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.
  18. Martin Feldstein & Stephanie Seligman, 1980. "Pension Funding, Share Prices, and National Saving," NBER Working Papers 0509, National Bureau of Economic Research, Inc.
  19. 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.
  20. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
  21. Steven G. Allen & Robert L. Clark, 1985. "Unions, Pension Wealth, and Age-Compensation Profiles," NBER Working Papers 1677, National Bureau of Economic Research, Inc.
  22. Clark,Robert L. & Spengler,Joseph J., 1980. "The Economics of Individual and Population Aging," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521297028.
  23. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 529-46, October.
  24. 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.
  25. Edward P. Lazear, 1982. "Pensions as Severance Pay," NBER Working Papers 0944, National Bureau of Economic Research, Inc.
  26. 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.
  27. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(6), pages 1261-84, December.
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Cited by:
  1. 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.
  2. Bernheim, B. Douglas, 2002. "Taxation and saving," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 18, pages 1173-1249 Elsevier.
  3. Robert L. Clark & Joseph F. Quinn, 1999. "Effects of Pensions on Labor Markets and Retirement," Boston College Working Papers in Economics, Boston College Department of Economics 431, Boston College Department of Economics.
  4. 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.
  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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