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Stochastic Models for Pensionable Service

Author

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  • Izzet Sahin

    (University of Wisconsin, Milwaukee, Wisconsin)

  • Yves Balcer

    (University of Wisconsin, Madison, Wisconsin)

Abstract

This paper investigates the effects of vesting rules and termination rates on the accumulation of pensionable service. First, a theoretical framework is developed, through stochastic models in continuous time, to characterize the cumulative pensionable service with reference to its moments, under an arbitrary age-service vesting rule. In the most general case, the rate of employment termination is allowed to be a function of both age and time spent in an employment. Next, a discrete computational model is presented for the determination of the distribution of pensionable service and of related measures, using age and service-dependent termination rates as input. This model is applied to Canadian Public Service and the results are discussed. Also considered are the employer's perspective and passage from pensionable service to pension benefits.

Suggested Citation

  • Izzet Sahin & Yves Balcer, 1979. "Stochastic Models for Pensionable Service," Operations Research, INFORMS, vol. 27(5), pages 888-903, October.
    • Handle: RePEc:inm:oropre:v:27:y:1979:i:5:p:888-903
    DOI: 10.1287/opre.27.5.888
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    Cited by:

    1. D'Amico, Guglielmo & Guillen, Montserrat & Manca, Raimondo, 2009. "Full backward non-homogeneous semi-Markov processes for disability insurance models: A Catalunya real data application," Insurance: Mathematics and Economics, Elsevier, vol. 45(2), pages 173-179, October.
    2. Fredrik Stenberg & Raimondo Manca & Dmitrii Silvestrov, 2007. "An Algorithmic Approach to Discrete Time Non-homogeneous Backward Semi-Markov Reward Processes with an Application to Disability Insurance," Methodology and Computing in Applied Probability, Springer, vol. 9(4), pages 497-519, December.
    3. Guglielmo D’Amico & Montserrat Guillen & Raimondo Manca, 2012. "Discrete time Non-homogeneous Semi-Markov Processes applied to Models for Disability Insurance," Working Papers XREAP2012-05, Xarxa de Referència en Economia Aplicada (XREAP), revised Mar 2012.

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