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Incentive Effects of Pensions

In: Pensions, Labor, and Individual Choice

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  • Edward P. Lazear

Abstract

Many different types of pension plans exist in American firms. The stipulations of plans vary dramatically, even among large firms, with respect to vesting, relationship of the pension to final salary, maximum and minimum years of service constraints, and maximum and minimum benefit levels. These provisions are examined to determine their effects on worker behavior.Specifically, the paper analyes which plans encourage or discourage appropriate worker responses in hours worked, turnover, human capital investment and effort. An attempt is made to explain the provisions in light of the findings.
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Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberch:7136
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    References listed on IDEAS

    as
    1. Jeremy I. Bulow, 1979. "Analysis of Pension Funding Under Erisa," NBER Working Papers 0402, National Bureau of Economic Research, Inc.
    2. Edward P. Lazear, 1983. "Pensions as Severance Pay," NBER Chapters,in: Financial Aspects of the United States Pension System, pages 57-90 National Bureau of Economic Research, Inc.
    3. Michael Rothschild & Joseph Stiglitz, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 629-649.
    4. Lazear, Edward P, 1981. "Agency, Earnings Profiles, Productivity, and Hours Restrictions," American Economic Review, American Economic Association, vol. 71(4), pages 606-620, September.
    5. Roger H. Gordon & Alan S. Blinder, 1980. "Market wages, reservation wages, and retirement decisions," NBER Chapters,in: Econometric Studies in Public Finance, pages 277-308 National Bureau of Economic Research, Inc.
    6. Richard V. Burkhauser & Joseph F. Quinn, 1983. "The Effect of Pension Plans on the Pattern of Life Cycle Compensation," NBER Chapters,in: The Measurement of Labor Cost, pages 395-420 National Bureau of Economic Research, Inc.
    7. Robert C. Merton, 1983. "On Consumption Indexed Public Pension Plans," NBER Chapters,in: Financial Aspects of the United States Pension System, pages 259-290 National Bureau of Economic Research, Inc.
    8. Irwin Tepper, 1981. "Taxation and Corporate Pension Policy," NBER Working Papers 0661, National Bureau of Economic Research, Inc.
    9. Tepper, Irwin, 1981. "Taxation and Corporate Pension Policy," Journal of Finance, American Finance Association, vol. 36(1), pages 1-13, March.
    10. Edward P. Lazear, 1982. "Severance Pay, Pensions, and Efficient Mobility," NBER Working Papers 0854, National Bureau of Economic Research, Inc.
    11. Joanne Salop & Steven Salop, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 619-627.
    12. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    13. Joanne Salop & Steven C. Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
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    Citations

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    Cited by:

    1. Chen, Xuanjuan & Yao, Tong & Yu, Tong & Zhang, Ting, 2014. "Learning and incentive: A study on analyst response to pension underfunding," Journal of Banking & Finance, Elsevier, vol. 45(C), pages 26-42.
    2. Steven G. Allen & Robert L. Clark, 1987. "Pensions and Firm Performance," NBER Working Papers 2266, National Bureau of Economic Research, Inc.
    3. Alicia H. Munnell & Steven A. Sass, 2007. "The Labor Supply of Older Americans," Working Papers, Center for Retirement Research at Boston College wp2007-12, Center for Retirement Research, revised Jun 2007.
    4. James M. Poterba & Steven F. Venti, 2004. "The Transition to Personal Accounts and Increasing Retirement Wealth: Macro- and Microevidence," NBER Chapters,in: Perspectives on the Economics of Aging, pages 17-80 National Bureau of Economic Research, Inc.
    5. Shawn Ni & Michael Podgursky, 2016. "How Teachers Respond to Pension System Incentives: New Estimates and Policy Applications," Journal of Labor Economics, University of Chicago Press, vol. 34(4), pages 1075-1104.
    6. Kauffman, Kyle D. & Cribari-Neto, Francisco, 1995. "To pay or not to pay: Positive incentives as a calibrating device in the white indenture system," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(3), pages 257-269.
    7. R. Glenn Hubbard, 1987. "Uncertain Lifetimes, Pensions, and Individual Saving," NBER Chapters,in: Issues in Pension Economics, pages 175-210 National Bureau of Economic Research, Inc.
    8. Herman B. Leonard, 1987. "Investing in the Defense Work Force: The Debt and Structure of Military Pensions," NBER Chapters,in: Public Sector Payrolls, pages 47-78 National Bureau of Economic Research, Inc.
    9. Juan F. Jimeno, "undated". "Incentivos y desigualdad en el sistema espaƱol de pensiones contributivas de jubilaciĆ³n," Working Papers 2002-13, FEDEA.
    10. Danzer, Alexander M., 2010. "Retirement Responses to a Generous Pension Reform: Evidence from a Natural Experiment in Eastern Europe," IZA Discussion Papers 4726, Institute for the Study of Labor (IZA).
    11. Anna Cristina d'Addio & Maria Chiara Cavalleri, 2015. "Labour Mobility and the Portability of Social Rights in the EU," CESifo Economic Studies, CESifo, vol. 61(2), pages 346-376.
    12. Bender, Keith A., 2009. "How are pension integration and pension benefits related?," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(1), pages 26-41, February.

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