The Usefulness of the Wind-Up Measure of Pension Liabilities: A LabourMarket Perspective
Financial economists have long favoured the use of a wind-up measure of the firm's pension liabilities. Yet the pension liabilities of the firm also represent the pension wealth of its workers. It is reasonable to presume that workers and shareholders have a common view of the pension contract. If the wind-up measure depicts the true pension liabilities of the firm, then the wage concession granted by its workers must reflect the fact that the firm may choose to terminate the plan at any time. Data on the wage-service characteristics of the membership of a sample of final earnings plans in Canada suggest,contrary to the implications of the wind-up measure, that workers' wages do not internalize accruing pension benefits on a year-to-year basis. Instead, the data suggest that pension plans may be a vehicle through which a significant portion of the total compensation of individual employees is deferred until their later work years, and that the wind-up measure may well understate the pension liabilities of an on-going firm.
|Date of creation:||Feb 1985|
|Publication status:||published as Pesando, James E. "The Usefulness of the Wind-Up Measure of Pension Liabilities: A Labour Market Perspective," Journal of Finance, Vol. 40, No.3, ( July 1985), pp. 927-940.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987.
"How Does the Market Value Unfunded Pension Liabilities?,"
NBER Chapters,in: Issues in Pension Economics, pages 81-110
National Bureau of Economic Research, Inc.
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- Jeremy I. Bulow, 1982. "What are Corporate Pension Liabilities?," The Quarterly Journal of Economics, Oxford University Press, vol. 97(3), pages 435-452. Full references (including those not matched with items on IDEAS)
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