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What Do Unions Do to Pension Performance?

Author

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  • Even, William E.

    (Miami University)

  • Macpherson, David A.

    (Trinity University)

Abstract

This study argues that the promotion of union goals could have positive, negative, or neutral effects on risk adjusted return performance. Moreover, the union's ability and incentive to use pension assets to promote union goals will vary with the design of the pension. Using panel data on over 36,000 pension plans drawn from IRS Form 5500 filings, we empirically estimate the effects of unions on risk adjusted returns and find that the union effect on performance varies in ways that are consistent with our priors. In particular, unions have the largest negative effect among multi-employer defined contribution plans and the negative effect of unions can be eliminated by a switch to participant direction. Also, we find that unions improve performance for single employer defined contribution plans.

Suggested Citation

  • Even, William E. & Macpherson, David A., 2010. "What Do Unions Do to Pension Performance?," IZA Discussion Papers 5256, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5256
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    References listed on IDEAS

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    1. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2008. "The Small World of Investing: Board Connections and Mutual Fund Returns," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 951-979, October.
    2. Ian Tonks, 2005. "Performance Persistence of Pension-Fund Managers," The Journal of Business, University of Chicago Press, vol. 78(5), pages 1917-1942, September.
    3. David S. Lee & Alexandre Mas, 2012. "Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961--1999," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 333-378.
    4. repec:pri:cepsud:182lee is not listed on IDEAS
    5. Ashwini K. Agrawal, 2012. "Corporate Governance Objectives of Labor Union Shareholders: Evidence from Proxy Voting," The Review of Financial Studies, Society for Financial Studies, vol. 25(1), pages 187-226.
    6. David S. Lee & Alexandre Mas, 2012. "Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961--1999," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 333-378.
    7. Shleifer, Andrei & Vishny, Robert W, 1986. "Large Shareholders and Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 461-488, June.
    8. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    9. David S. Lee & Alexandre Mas, 2009. "Long-Run Impacts of Unions on Firms: New Evidence from Financial Markets, 1961-1999," Working Papers 1117, Princeton University, Department of Economics, Industrial Relations Section..
    10. Barry T. Hirsch, 2004. "What Do Unions Do for Economic Performance?," Journal of Labor Research, Transaction Publishers, vol. 25(3), pages 415-456, July.
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    Cited by:

    1. Kim, Dongwoo & Koedel, Cory & Xiang, P. Brett, 2021. "The trade-off between pension costs and salary expenditures in the public sector," Journal of Pension Economics and Finance, Cambridge University Press, vol. 20(1), pages 151-168, January.
    2. J. Adam Cobb, 2015. "Risky Business: The Decline of Defined Benefit Pensions and Firms’ Shifting of Risk," Organization Science, INFORMS, vol. 26(5), pages 1332-1350, October.
    3. Blanchflower, David G., 2006. "A Cross-Country Study of Union Membership," IZA Discussion Papers 2016, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    defined contribution; unions; rate of return; pension; defined benefit;
    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

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