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Pensions, Bonding, and Lifetime Jobs

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  • Steven G. Allen
  • Robert L. Clark
  • Ann A. McDermed

Abstract

A well-known, if underappreciated, finding in the mobility literature is that turnover is much lower in jobs covered by pensions than in other jobs. This could result from capital losses for job changes created by most benefit formulas, the tendency of turnover-prone individuals to avoid jobs covered by pensions, or higher overall compensation levels in such jobs. A switching bivariate probit model of pension coverage and turnover is developed to estimate the effect of each of these factors. The results show that capital losses are the main factor responsible for lower turnover in jobs covered by pensions, but self-selection and compensation levels also play an important role. This is the first direct evidence that bonding is important for understanding long-term employment relationships.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3688.

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Date of creation: Apr 1991
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Publication status: published as Journal of Human Resources, Summer 1993, vol. 28, no. 3, p. 463-481
Handle: RePEc:nbr:nberwo:3688

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Citations

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Cited by:
  1. Leora Friedberg & Michael T. Owyang, 2004. "Explaining the evolution of pension structure and job tenure," Working Papers, Federal Reserve Bank of St. Louis 2002-022, Federal Reserve Bank of St. Louis.
  2. Montgomery, Edward & Shaw, Kathryn, 1997. "Pensions and Wage Premia," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 35(3), pages 510-22, July.
  3. 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.
  4. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(4), pages 113-138, Fall.
  5. Alicia H. Munnell & Kelly Haverstick & Geoffrey Sanzenbacher, 2006. "Job Tenure and Pension Coverage," Working Papers, Center for Retirement Research at Boston College, Center for Retirement Research wp2006-18, Center for Retirement Research, revised Oct 2006.
  6. Christian E. Weller, 2011. "What Does the Literature Tell Us About the Possible Effect of Changing Retirement Benefits on Public Employee Effectiveness?," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp270, Political Economy Research Institute, University of Massachusetts at Amherst.
  7. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Effects of Tax-Based Saving Incentives On Saving and Wealth," NBER Working Papers, National Bureau of Economic Research, Inc 5759, National Bureau of Economic Research, Inc.
  8. Gary V. Engelhardt, 2000. "Have 401(k)s Raised Household Saving? Evidence from the Health and Retirement Study," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 33, McMaster University.
  9. repec:umc:wpaper:1310 is not listed on IDEAS
  10. Gustman, A.L. & Mitchell, O.S. & Steinmeier, T.L., 1993. "The Role of Pensions in the Labor Market," Papers, Cornell - Center for Advanced Human Resource Studies 93-07, Cornell - Center for Advanced Human Resource Studies.
  11. David McCarthy, 2003. "A Lifecycle Analysis of Defined Benefit Pension Plans," Working Papers, University of Michigan, Michigan Retirement Research Center wp053, University of Michigan, Michigan Retirement Research Center.
  12. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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