Have Lazear-Style Implicit Contracts Disappeared?

Balan, David J.

doi:10.2139/ssrn.329281

Cited by 11 publications

(18 citation statements)

References 16 publications

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“…From the firm's perspective, DC plans may have lower direct costs (Hustead 1998;D'Souza et al 2006) and lower indirect costs when production and technology needs change rendering the long term employment relationship that DB plans facilitate less desirable (Ippolito 1995(Ippolito , 2001Friedberg and Owyang 2004;Balan 2003;Aaronson and Coronado 2005). In the latter explanation, the firm enjoys lower costs by switching to a DC plan and not offering the implicit contract of a DB plan when the value of the firm's specific human capital has declined.…”

Section: Institutional Background and Previous Literaturementioning

confidence: 99%

On the Determinants of Defined Benefit Pension Plan Conversions

Kapinos

2008

J Labor Res

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Section: Institutional Background and Previous Literaturementioning

confidence: 99%

On the Determinants of Defined Benefit Pension Plan Conversions

Kapinos

2008

J Labor Res

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“…Both Friedberg and Owyang (2002) and Balan (2003) suggest that these contracts could become unstable in the face of changes in production technology that led to a relatively higher return to general versus firm-specific human capital. Such a shift in production technology would lead to higher employee mobility and shorter average tenure, making the retention of employees with a DB contract prohibitively expensive even for firms that still realize a gain from longer tenure due to the higher probability employees face of receiving a more lucrative outside offer of employment.…”

Section: Shifting Pension Coveragementioning

confidence: 99%

Cash balance pension plan conversions and the new economy

Coronado¹,

Copeland

2004

Journal of Pension Economics and Finance

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Many firms that sponsor traditional defined benefit pensions have converted their plans to cash balance plans in the last ten years. Cash balance plans combine features of defined benefit (DB) and defined contribution (DC) plans, and yet their introduction has proven considerably more controversial than has the increasing popularity of DC plans. The goal of this study is to estimate a hierarchy of the influences on the decision of a firm to convert its traditional defined benefit pension plan to a cash balance plan. Our results indicate that cash balance conversions have been undertaken in competitive industries with tight labor markets and can be viewed largely as a response to better compensate a more mobile labor force. Indeed, many firms appear to increase their pension liabilities through such conversions. The results also shed light on the possible determinants of the broader shift from DB to DC pension coverage.

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“…Theoretical papers by Ippolito (2001), Friedberg and Owyang (2002) and Balan (2003) suggest that back-loaded DB pensions could become unstable in the face of changes in production technology that lead to an increase in the return to skills that are transferable across firms versus firm-specific skills. In terms of the equilibrium conditions we have specified, such a shift in technology would lower the value of DB A relative to DC A , reducing the likelihood that equation 3 will be satisfied.…”

Section: Introductionmentioning

confidence: 99%

Are Firms or Workers Behind the Shift Away from DB Pension Plans?

Aaronson

Coronado

2005

FEDS

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One of the most striking changes in the composition of household retirement savings over the past 20 years has been the shift from defined benefit to defined contribution pension plans. Understanding the factors underlying this shift is important for determining its impact on retirement saving adequacy. Yet previous research, which has mostly focused on factors affecting all firms, such as regulation or increased longevity, has yielded little consensus. In this study we estimate the contribution of changing workforce characteristics and production environments to the shift in pension coverage. Our findings suggest that, while aggregate factors explain a large part of the movement, changes in worker demand, due to evolving workforce characteristics, also contributed notably. On the supply side, we find support for the theory that technical change has reduced the value of DB plans. These supply and demand factors are particularly important for explaining the significant variation in cross-industry trends in pension coverage.

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Have Lazear-Style Implicit Contracts Disappeared?

Cited by 11 publications

References 16 publications

On the Determinants of Defined Benefit Pension Plan Conversions

On the Determinants of Defined Benefit Pension Plan Conversions

Cash balance pension plan conversions and the new economy

Are Firms or Workers Behind the Shift Away from DB Pension Plans?

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