Pension Benefit Insurance and Pension Plan Portfolio Choice
Pension benefit guarantee policies have been introduced in several countries to protect private pension plan members from the loss of income that would occur if a plan was underfunded when the sponsoring firm terminates a plan. Most of these public insurance schemes face financial difficulty and consequently policy reforms are being discussed or implemented. Economic theory suggests that such schemes will face moral hazard and adverse selection problems. In this note we test a specific theoretical prediction -- insured plans will invest more heavily in risky assets. Our test exploits differences in insurance arrangements across Canadian jurisdictions. We find that insured plans invest about 5 percent more in equities than do similar plans without benefit guarantees.
|Date of creation:||Dec 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.mcmaster.ca/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
- Nielson, Norma L. & Chan, David K. W., 2007. "Private pensions and government guarantees: clues from Canada," Journal of Pension Economics and Finance, Cambridge University Press, vol. 6(01), pages 45-66, March.
- Sharpe, William F., 1976. "Corporate pension funding policy," Journal of Financial Economics, Elsevier, vol. 3(3), pages 183-193, June.
- Jeffrey R. Brown, 2007.
"Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation,"
NBER Working Papers
13438, National Bureau of Economic Research, Inc.
- Jeffrey R. Brown, 2008. "Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 177-198, Winter.
- Mario Jametti, 2008. "Underfunding of Defined Benefit Pension Plans and Benefit Guarantee Insurance: An Overview of Theory and Evidence," Canadian Public Policy, University of Toronto Press, vol. 34(s1), pages 39-46, November.
- Stephen G. Donald & Kevin Lang, 2007. "Inference with Difference-in-Differences and Other Panel Data," The Review of Economics and Statistics, MIT Press, vol. 89(2), pages 221-233, May.
- Michael Baker & Kevin Milligan, 2008.
"Evidence From Maternity Leave Expansions of the Impact of Maternal Care on Early Child Development,"
NBER Working Papers
13826, National Bureau of Economic Research, Inc.
- Michael Baker & Kevin Milligan, 2010. "Evidence from Maternity Leave Expansions of the Impact of Maternal Care on Early Child Development," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
- Zvi Bodie, 1989. "Pension Funds and Financial Innovation," NBER Working Papers 3101, National Bureau of Economic Research, Inc.
- Cooper, Russell W. & Ross, Thomas W., 2003. "Protecting underfunded pensions: the role of guarantee funds," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(03), pages 247-272, November.
- David W. Wilcox, 2006. "Reforming the Defined-Benefit Pension System," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 37(1), pages 235-304.
When requesting a correction, please mention this item's handle: RePEc:mcm:qseprr:428. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.