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The decline of defined benefit plans and job tenure

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  • SCHRAGER, ALLISON

Abstract

This paper investigates the consequences of relying on assets accumulated in a defined contribution pension plan compared to an annuity based on salary from a defined benefit plan. Although a defined contribution plan varies with asset returns, it may be more desirable than a defined benefit plan when wage variability and job turnover are adequately considered. It is found that both job separation rates and wage variance increased in the 1990s. The new calibrations of these variables are used in a life-cycle model where a worker chooses between a defined benefit and a defined contribution plan. It is shown that the increase in job turnover made defined contribution the dominant pension plan.

Suggested Citation

  • Schrager, Allison, 2009. "The decline of defined benefit plans and job tenure," Journal of Pension Economics and Finance, Cambridge University Press, vol. 8(3), pages 259-290, July.
    • Handle: RePEc:cup:jpenef:v:8:y:2009:i:03:p:259-290_00
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    Cited by:

    1. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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