AN EMPIRICAL ANALYSIS OF PENSIONS FOR THE LABOR MARKET
Empirical research of pensions and its role in the labor market has been limiting and has led to inconclusive and sometimes contradictory results. What is needed to have a better understanding of the role of pensions is better data that are longitudinal and national, include worker and firm information, and provide information that helps deal with endogeneity between certain variables. This dissertation discusses such a new data set and discusses the empirical uses of the data when investigating the role of pensions on firm productivity. This dissertation comprises of two chapters. Each chapter is discussed below. Chapter 1, "Results from Integrating the Form 5500 Pension Information with the U.S. Census Business Register and the Longitudinal Employer-Household Dynamics State Data" discusses the process in creating a new, unique data set which is longitudinal and includes information about private firms, their employees, and the different pensions that they offer. This data has firm and pension information for all private employers in the United States for years 1994 through 2001 and added employee information for firms that exist in twelve states over the same period. This data set is shown to be far superior to any currently available data set. Chapter 2, "Do Changes in Deferred Compensation Lead to Changes in Productivity?" empirically examines the effects on firm productivity when a firm terminates a defined benefit plan and replaces it with a defined contribution plan. The empirical analysis was done using the data set discussed in Chapter 1. The empirical results show that when performing two-step estimations and comparing one group of firms that kept their defined benefit plans to another group of firms that converted their pension plans, the group that converted experienced a reduction in productivity between the years 1995 and 2000. There is some evidence that this result occurred because workers no longer had the incentive to remain with the firm once the defined benefit plan was replaced, and as a result, workers were leaving the firm before gaining firm-specific skills. However, more work needs to be done to determine if the reduction in employee retention is truly the cause.
Society of Labor Economics Seminar
pensions; endogeneity; defined benefit plans; defined contribution plans; pension conversions
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Previously Published As
Society of Labor Economics Eleventh Annual Meetings. May 5-6, 2006. Cambridge, MA
dissertation or thesis