Working Paper: NBER ID: w1126
Authors: Edward P. Lazear
Abstract: Many different types of pension plans exist in American firms. The stipulations of plans vary dramatically, even among large firms, with respect to vesting, relationship of the pension to final salary, maximum and minimum years of service constraints, and maximum and minimum benefit levels. These provisions are examined to determine their effects on worker behavior.Specifically, the paper analyes which plans encourage or discourage appropriate worker responses in hours worked, turnover, human capital investment and effort. An attempt is made to explain the provisions in light of the findings.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| defined benefit pattern plans (J32) | efficient allocation of resources (D61) |
| defined benefit conventional plans (J32) | too little turnover (J60) |
| defined benefit conventional plans (J32) | excessive work (J81) |
| defined benefit conventional plans (J32) | over-investment in human capital (J24) |
| defined contribution plans (J32) | efficient allocation of resources (D61) |
| complete and immediate vesting (H55) | fully efficient pension plans (H55) |
| incomplete vesting (D52) | inefficiencies (D61) |
| minimum years of service constraints (C41) | inefficiencies in pattern plans (R14) |
| maximum years of service constraints (C41) | offset inefficiencies introduced by minimum constraints (D61) |
| specified required effort levels (J22) | mitigate inefficiencies associated with defined benefit conventional plans (J32) |
| worker internalizes relationship between wages and pensions (J32) | pension benefit formulas cannot affect worker behavior (J32) |