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The Impact of Human Capital Investments on Pension Benefits

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  • Johnson, Richard W

Abstract

This article develops a model, with deferred compensation and severance pay, that predicts that workers bear all the costs and receive all the returns of human capital investments and that specific investments yield higher returns than general investments. This model also predicts that pensions, which efficiently defer compensation, will be positively related to specific investments. Evidence from the National Longitudinal Survey of Older Men confirms these predictions; participation in company-sponsored training programs, proxying for specific investments, increases the probability of pension receipt and the level of benefits. More general training outside the firm has much smaller effects on pensions. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Johnson, Richard W, 1996. "The Impact of Human Capital Investments on Pension Benefits," Journal of Labor Economics, University of Chicago Press, vol. 14(3), pages 520-554, July.
  • Handle: RePEc:ucp:jlabec:v:14:y:1996:i:3:p:520-54
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    References listed on IDEAS

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    1. Richard V. Burkhauser, 1979. "The Pension Acceptance Decision of Older Workers," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 63-75.
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    9. Joseph F. Quinn, 1977. "Microeconomic Determinants of Early Retirement: A Cross-Sectional View of White Married Men," Journal of Human Resources, University of Wisconsin Press, vol. 12(3), pages 329-346.
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    12. Christopher Cornwell & Stuart Dorsey & Nasser Mehrzad, 1991. "Opportunistic Behavior by Firms in Implicit Pension Contracts," Journal of Human Resources, University of Wisconsin Press, vol. 26(4), pages 704-725.
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    Citations

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    Cited by:

    1. Johnson, Richard W., 1997. "Pension Underfunding and Liberal Retirement Benefits Among State and Local Government Workers," National Tax Journal, National Tax Association, vol. 50(1), pages 113-42, March.
    2. Ghilarducci, Teresa & Reich, Michael, 1998. "Training and Pensions: Substitutes or Complements?," Institute for Research on Labor and Employment, Working Paper Series qt2xq878qt, Institute of Industrial Relations, UC Berkeley.
    3. Haynes, Jonathan B. & Sessions, John G., 2013. "Work now, pay later? An empirical analysis of the pension–pay trade off," Economic Modelling, Elsevier, vol. 30(C), pages 835-843.
    4. Inkmann, Joachim, 2006. "Compensating wage differentials for defined benefit and defined contribution occupational pension scheme benefits," LSE Research Online Documents on Economics 24516, London School of Economics and Political Science, LSE Library.
    5. Hart Robert A. & Ma Yue, 2008. "Wages, Hours and Human Capital Over the Life Cycle," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 446-464, October.
    6. Montizaan Raymond & Coervers Frank & Grip Andries de, 2007. "Training and early Retirement," ROA Research Memorandum 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    7. Johnson, Richard W., 1997. "Pension Underfunding and Liberal Retirement Benefits Among State and Local Government Workers," National Tax Journal, National Tax Association, vol. 50(1), pages 113-142, March.
    8. Blake, David, 2003. "Modelling the composition of personal sector wealth in the United Kingdom," LSE Research Online Documents on Economics 24866, London School of Economics and Political Science, LSE Library.
    9. Montizaan, Raymond & Cörvers, Frank & de Grip, Andries, 2008. "Training Background and Early Retirement," IZA Discussion Papers 3504, Institute for the Study of Labor (IZA).
    10. Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.

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