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Pensions and Indenture Premia

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  • Richard A. Ippolito

Abstract

The implicit pension contract has provided a theoretical basis for the observed relation between pensions, less quitting and earlier retirement. But it also has encountered difficulty explaining why wages seem "too high" in pension firms. This anomaly has been taken by some to imply that efficiency wages, not pension capital losses, explain why quitting is abnormally low in defined benefit pensions. In this paper, I pursue an alternative explanation, that the implicit contract model is oversimplified because it ignores supply conditions facing long-tenure firms. I show that once an allowance is made for compensation required by workers for entering long-term labor contracts, numerous anomalous empirical observations in the pension market are explicable.

Suggested Citation

  • Richard A. Ippolito, 1994. "Pensions and Indenture Premia," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 795-812.
    • Handle: RePEc:uwp:jhriss:v:29:y:1994:iii:1:p:795-812
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    Cited by:

    1. Andrietti, Vincenzo & Patacchini, Eleonora, 2004. "Occupationa pensions, wages and tenure wage profiles," UC3M Working papers. Economics we043612, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Saime S KAYAM & Merih CELİKTOPUZ & Mehmet KORAY PARKIN, 2013. "Features That Influence The Exit Decision From The Private Pension System In Turkey," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 4(2), pages 145-155.
    3. Barrientos, Armando, 1998. "Pension reform, personal pensions and gender differences in pension coverage," World Development, Elsevier, vol. 26(1), pages 125-137, January.
    4. Richard Disney & Carl Emmerson, 2002. "Choice of pension scheme and job mobility in Britain," IFS Working Papers W02/09, Institute for Fiscal Studies.
    5. Robert L. Clark & Joseph F. Quinn, 1999. "Effects of Pensions on Labor Markets and Retirement," Boston College Working Papers in Economics 431, Boston College Department of Economics.
    6. Leora Friedberg & Michael T. Owyang, 2004. "Explaining the evolution of pension structure and job tenure," Working Papers 2002-022, Federal Reserve Bank of St. Louis.
    7. Ashok Thomas & Luca Spataro, 2016. "The Effects Of Pension Funds On Markets Performance: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 1-33, February.
    8. Andrietti, Vincenzo, 2004. "Pension choices and job mobility in the UK," UC3M Working papers. Economics we043713, Universidad Carlos III de Madrid. Departamento de Economía.
    9. 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.
    10. Haynes, Jonathan B. & Sessions, John G., 2013. "Work now, pay later? An empirical analysis of the pension–pay trade off," Economic Modelling, Elsevier, vol. 30(C), pages 835-843.
    11. Anja Decressin & Julia Lane & Kristin McCue & Martha Stinson, 2005. "Employer-Provided Benefit Plans, Workforce Composition and Firm Outcomes," Longitudinal Employer-Household Dynamics Technical Papers 2005-01, Center for Economic Studies, U.S. Census Bureau.

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