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Pensions, Bonding, and Lifetime Jobs

  • Steven G. Allen
  • Robert L. Clark
  • Ann A. McDermed

A well-known, if underappreciated, finding in the mobility literature is that turnover is much lower in jobs covered by pensions than in other jobs. This could result from capital losses for job changes created by most benefit formulas, the tendency of turnover-prone individuals to avoid jobs covered by pensions, or higher overall compensation levels in such jobs. A switching bivariate probit model of pension coverage and turnover is developed to estimate the effect of each of these factors. The results show that capital losses are the main factor responsible for lower turnover in jobs covered by pensions, but self-selection and compensation levels also play an important role. This is the first direct evidence that bonding is important for understanding long-term employment relationships.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3688.

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Date of creation: Apr 1991
Date of revision:
Publication status: published as Journal of Human Resources, Summer 1993, vol. 28, no. 3, p. 463-481
Handle: RePEc:nbr:nberwo:3688
Note: LS
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