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Pensions and Wage Premia

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  • Edward Montgomery
  • Kathryn Shaw

Abstract

In this paper we use that the theory of compensating differentials to identify sources of heterogeneity in firms' costs of providing fringe benefits and hence heterogeneity in the magnitude of the compensating differential. We estimate the relationship between pensions and wages controlling for variations in the size of the compensating differential related to firm size or the presence of a union. Both firm size and unionism are commonly associated with the payment of wage premia and/or the presence of market power where the costs of fringe benefits to the firm may be less. Our results are consistent with these a priori expectations and suggest that the magnitude of the compensating differential is significantly higher in nonunion and in small firms.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3985.

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Date of creation: Feb 1992
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Publication status: published as Montgomery, Edward and Kathryn Shaw. "Pensions And Wage Premia," Economic Inquiry, 1997, v35(3,Jul), 510-522.
Handle: RePEc:nbr:nberwo:3985

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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. Akerlof, George A & Katz, Lawrence F, 1989. "Workers' Trust Funds and the Logic of Wage Profiles," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 525-36, August.
  3. Duncan, Greg J & Stafford, Frank P, 1980. "Do Union Members Receive Compensating Wage Differentials?," American Economic Review, American Economic Association, vol. 70(3), pages 355-71, June.
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  5. Joni Hersch & W. Kip Viscusi, 1990. "Cigarette Smoking, Seatbelt Use, and Differences in Wage-Risk Tradeoffs," Journal of Human Resources, University of Wisconsin Press, vol. 25(2), pages 202-227.
  6. 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.
  7. Jeremy I. Bulow, 1985. "The Relationship between Wages and Benefits," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 379-398 National Bureau of Economic Research, Inc.
  8. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  9. Schiller, Bradley R & Weiss, Randall D, 1980. "Pensions and Wages: A Test for Equalizing Differences," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 529-38, November.
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  12. 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.
  13. Even, William E & Macpherson, David A, 1990. "The Gender Gap in Pensions and Wages," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 259-65, May.
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  17. 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.
  18. Richard A. Ippolito, 1991. "Encouraging long-term tenure: Wage tilt or pensions?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(3), pages 520-535, April.
  19. Dorsey, Stuart, 1987. "The Economic Functions of Private Pensions: An Empirical Analysis," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages S171-89, October.
  20. Pearce, James E, 1990. "Tenure, Unions, and the Relationship between Employer Size and Wages," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 251-69, April.
  21. Alan L. Gustman & Thomas L. Steinmeier, 1987. "Pensions, Efficiency Wages, and Job Mobility," NBER Working Papers 2426, National Bureau of Economic Research, Inc.
  22. Ronald G. Ehrenberg, 1980. "Retirement system characteristics and compensating wage differentials in the public sector," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(4), pages 470-483, July.
  23. Steven G. Allen & Robert L. Clark, 1985. "Unions, Pension Wealth, and Age-Compensation Profiles," NBER Working Papers 1677, National Bureau of Economic Research, Inc.
  24. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-20, September.
  25. Steven G. Allen & Robert L. Clark & Ann A. McDermed, 1991. "Pensions, Bonding, and Lifetime Jobs," NBER Working Papers 3688, National Bureau of Economic Research, Inc.
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Cited by:
  1. Anthony Marino & Jan Zabojnik, 2006. "Work-Related Perks, Agency Problems, and Optimal Incentive Contracts," Working Papers 1107, Queen's University, Department of Economics.
  2. Danzer, Alexander M. & Dolton, Peter J., 2012. "Total Reward and pensions in the UK in the public and private sectors," Munich Reprints in Economics 20028, University of Munich, Department of Economics.
  3. Lu, Yi & Tao, Zhigang & Wang, Yijiang, 2010. "Union effects on performance and employment relations: Evidence from China," China Economic Review, Elsevier, vol. 21(1), pages 202-210, March.
  4. Christian E. Weller, 2011. "What Does the Literature Tell Us About the Possible Effect of Changing Retirement Benefits on Public Employee Effectiveness?," Working Papers wp270, Political Economy Research Institute, University of Massachusetts at Amherst.
  5. Meyer, Rebecca & Orazem, Peter & Wachenheim, William A., 2002. "Labor Market Implications of Rising Costs of Employer-Provided Health Insurance," Staff General Research Papers 10016, Iowa State University, Department of Economics.
  6. Danzer, Alexander M. & Dolton, Peter, 2011. "Total Reward in the UK in the Public and Private Sectors," IZA Discussion Papers 5656, Institute for the Study of Labor (IZA).
  7. Cooper, Russell W. & Ross, Thomas W., 2001. "Pensions: theories of underfunding," Labour Economics, Elsevier, vol. 8(6), pages 667-689, December.
  8. Erwin Ooghe & Erik Schokkaert & Jef Flechet, 2003. "The Incidence of Social Security Contributions: An Empirical Analysis," Empirica, Springer, vol. 30(2), pages 81-106, June.

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