IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/3908.html
   My bibliography  Save this paper

Pension COLAs

Author

Listed:
  • Alan L. Gustman
  • Thomas L. Steinmeier

Abstract

This paper studies cost of living adjustments in pensions from the perspective of labor economics. Evidence from longitudinal data on pension and annuity incomes of retirees suggests that pension COLAs are less important in the 1980s than in the 1970s, but that through 1987 they continued to cover about half of cost of living increases. Data from a longitudinal sample of pension benefit formulae and COLA provisions collected by the Wyatt Company for the fifty largest industrial companies indicate that if the 1968-78 decade persisted, cost of living adjustments would increase basic pension benefits for retirees by a half; while if the inflation experience were that of the 1978-88 period, pension COLAs would raise the present value of pensions by only fourteen percent. Simulation analysis allows an examination of the effects of pension COLA provisions on the key incentives emphasized in the pension literature, incentives affecting the retirement, turnover and shirking decisions. Pension COLAs are found to have very small effects on these incentives. Finally a simulation analysis demonstrates that when the contribution side of COLAs is taken into account, pension COLAs do not necessarily dampen the variation among generations in real incomes realized under alternative inflation shocks.

Suggested Citation

  • Alan L. Gustman & Thomas L. Steinmeier, 1991. "Pension COLAs," NBER Working Papers 3908, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3908
    Note: AG LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w3908.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Alan L. Gustman & Thomas L. Steinmeier, 1989. "Evaluating Pension Policies in a Model with Endogeous Contributions," NBER Working Papers 3085, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Steven G. Allen & Robert L. Clark & Ann A. McDermed, 1993. "Post-Retirement Increases in Pensions in the 1980s: Did Plan Finances Matter?," NBER Working Papers 4413, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3908. 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: () or (Joanne Lustig). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.