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The illusion of patient capital: evidence from pension investment policy in the Netherlands

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  • Francesco Macheda

Abstract

This paper takes issue with the popular idea that the involvement of labor unions within occupational pension funds would hinder short-term profit-maximizing strategies that instead characterizes private pension schemes in Anglo-Saxon countries. The aim is to contribute to demystifying this myth by looking at private pension institutions under the assumption that deregulated financial markets are not neutral and engender a network of power relationships which goes beyond direct market participants. The thesis of this paper is that the high profitability generated by speculative investments leads to a new political compromise between firms and organized labor, insofar as the buying and selling of easily liquidated assets by occupational pension funds guarantees high net-salary levels and generous pensions, without undermining the competitiveness of the firm – at least in the short run. On the other hand, however, it dramatically increases the intrinsic risk of a pension system that, in fact, depends on the state of health of global finance. Finally, we test our hypothesis by examining the investment strategies in the Netherlands, where occupational pension funds have been historically embedded within the structure of neo-corporative interest mediation.

Suggested Citation

  • Francesco Macheda, 2018. "The illusion of patient capital: evidence from pension investment policy in the Netherlands," Working Papers 0029, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.
    • Handle: RePEc:ast:wpaper:0029
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    More about this item

    Keywords

    Private Pensions; Labor unions; Power; Investment Decisions;
    All these keywords.

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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