the usefulness of the wind up measure of pension liabilities a labor market perspective financial economists have long favored the use of a wind up measure of the firm s pension liabilities yet the pension liabilities of the firm also represent the pension wealth of its workers it is reasonable to presume that workers and shareholders have a common view of the pension contract if the wind up measure depicts the true pension liabilities of the firm then the wage concession granted by its workers must reflect the fact that the firm may choose to terminate the plan at any time data on the wageservice characteristics of the membership of a sample of final earnings plans in canada suggest contrary to the implications of the wind up measure that workers wages do not internalize accruing pension benefits on a year to year basis instead the data suggest that pension plans may be a vehicle through which a significant portion of the total compensation of individual employees is deferred until their later work years and that the wind up measure may well understate the pension liabilities of an on going firm the financial accounting standards board 4 or fasb recently proposed that net pension assets or liabilities appear on the corporate balance sheet in order to make operational the concept of the augmented balance sheet one must construct measures of both pension assets and pension liabilities the noncontroversial view at least among economists is that pension assets be valued at market the fasb endorses this view the measurement of pension liabilities on the other hand remains controversial financial economists such as sharpe 10 have traditionally advocated a market or wind up measure of the firm s pension liabilities the pensions due under the terms of the plan if it were to be immediately terminated are calculated and these pensions are then costed at current annuity rates the accrued benefit method without salary projection is the actuarial valuation method used in the calculation the wind up measure is the market value of the firm s pension liabilities since it identifies the precise amount that the firm would require to discharge its legal obligation if the plan were terminated 1 yet the fasb now rejects the use of this method of calculating the firm s

why federal workers don t quit quit rates in the federal government are abnormally low some economists and the federal government itself have taken this to mean that federal wages are too high this paper provides an alternative explanation it shows that the timing of compensation across a career as well as its level affect quit rates pensions in particular impose large penalties on workers who quit early and the portion of federal pay in the form of pensions is very high this feature of the federal pay structure may explain its abnormally low quit rate as a general proposition quit rates are poor indices for judging pay adequacy

pensions and wages an hedonic price theory approach this paper examines whether a trade off exists between the level of pension benefits and wages the 1983 survey of consumer finance is used to match detailed information on pension plans to worker characteristics for a random sample of the population the pension wage tradeoff is estimated using both a contractual model of the labor market and the spot market model used in previous studies the results indicate a large negative tradeoff in the contractual model but only a negligible tradeoff in the spot market model results from estimating the underlying structural equations for pensions are also presented copyright 1992 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the implicit pension contract developments and new directions pension economics has emerged as a separate literature over the past decade some of the early pension work was devoted to financial issues including implications of pensions for savings rates and portfolio allocation most new developments however have stemmed from research surrounding labor markets this research has led to an implicit contract theory of pensions a theory that has pensions playing a more complicated role in worker firm relation than heretofore realized the theory explains much of economic behavior in labor markets and bridges a gap between labor and financial literatures this essay describes the genesis for these ideas and traces some of the most important research results in the area an equal amount of spece is devoted to a consideration of likely directions for future research

pension reform personal pensions and gender differences in pension coverage abstract the personal pension scheme introduced in chile in 1981 has acquired a paradigmatic role for pension reform in less developed and developed countries in contrast to the significant gender gap in private pension coverage observed in developed countries in chile women s participation in the personal pension scheme is marginally higher than men s using cross section data the paper analyzes the determinants of personal pension plan contribution in chile and their effects it concludes that women s strong pension propensities and pension plan design explain in large part the absence of a gender gap in private pension coverage in chile

a study of wages and reliability this article studies the role of reliability on the wage rate reliability is defined in the sense of showing up for scheduled work over an extended period just as reliability is an important determinant of product prices a worker s reliability ought to be an important determinant of his or her wage moreover while workers are not conveniently packaged by brand name firms form expectations about reliability across identifiable groups of workers and thus effectively attach brand names to workers based on their observable characteristics a worker s wage depends on his own track record and the reputation for reliability of his identifiable group using robust measures of reliability i find that observed reliability and expected reliability substantially affect the wage rate and that about half of the gender wage gap can be explained by differences in expected reliability between men and women in the workforce

opportunistic behavior by firms in implicit pension contracts several studies have established that under the most common form of pension coverage benefits accrue disproportionately near the end of a worker s career such backloading establishes a penalty for early quitting but may also create an incentive for opportunistic firm behavior because benefits generally are a function of highest earnings when nominal earnings are expected to rise an employer can reduce pension liabilities by discharging workers prior to retirement this paper uses the national longitudinal survey of mature men to test whether such actions by employers are systematic we estimate that pension covered workers with mean losses are less likely to be discharged unexpected increases in pension losses due to increases in inflation however raise the risk of discharge we find no evidence that the minimum vesting standards of the employees retirement income security act reduces the likelihood of discharge for older workers who previously were not vested these results are consistent with an implicit pension contract under which employer compliance is enforced by reputation

the role of pensions in the labor market a survey of the literature because employer sponsored group pension plans entail agreements between workers and their employers explicitly linking future payment and employment they offer an unusual window into long term employment relationships this review of recent research on pensions explores how pensions influence employee compensation retirement turnover and other matters central to the determination of labor s price and quantity over time the authors also outline some unanswered questions and difficult to reconcile findings because the pension promise involves an explicit and relatively well documented set of statements regarding future contingent payment and employment an examination of the design and operation of employersponsored group pension plans can yield important insights into the long term employment relationship specifically pension research illuminates some important labor market questions in two ways it offers insight into an important element of compensation in its own right and it furthers our understanding of labor markets in which long term

the gender gap in pensions and wages this study provides rationale for the underrepresentation of women in the pension sector and examines the consequences for the gender wage gap for a given set of observed characteristics a woman is 11 19 percent less likely than a man to have a pension of the unexplained portion of the gender wage gap 10 38 percent is due to unexplained differences in pension coverage finally consistent with a screening effect of pensions women are paid more equally in the pension sector copyright 1990 by mit press

the emergence of parallel markets in a transition economy the case of mozambique abstract the food rationing scheme in maputo mozambique was intended to ensure food security for the poor an analysis of survey data reveals that even households that possess ration cards are mainly reliant on parallel markets instead of the ration system for their purchases the results indicate that market liberalization including eliminating rationing will at worst be neutral for the poor and more likely be beneficial since the treasury will capture the rents associated with rationing that presently accrue to traders and parastatals

fringe benefits and labor mobility interindustry factor mobility is a crucial determinant of the income distribution effects of exogenous changes in relative commodity prices this examination of interindustry variation in wages and profits using data from manufacturing industries from

the twilight of flour rationing in pakistan abstract in 1987 pakistan removed a partially targeted but inefficient subsidy of flour available through ration shops and instituted a general subsidy on wheat this article discusses the rationale for the policy change and the steps taken by the government to minimize adverse public reaction however the derationing will result in only modest savings in its first year furthermore while the current policy has three stated goals 1 constant seasonal prices 2 uniform prices over the country and 3 an active private sector to a large degree the first two goals are incompatible with the third

food subsidies and exchange rate distortions in mozambique abstract in response to acute food shortages in mozambique induced by civil war drought and policies that favoured state farms and restricted private trade the government introduced a food rationing system in the two largest cities maputo and beira the primary function was to assure an equitable distribution of the limited food available but it has evolved into an untargeted income support programme as the crisis that led to its inception has abated this article emphasizes the need to transform the subsidy which at present is financed implicitly through exchange rate distortions into an explicit and targeted subsidy this would be consistent with the long term objectives of mozambique s economic recovery programme in which liberalization of commodity markets and exchange rate realignment are key policy reforms

workers trust funds and the logic of wage profiles this paper defines a concept a worker s trust fund which is useful in analyzing optimal age earnings profiles the trust fund represents what a worker loses if dismissed from a job for shirking in considering whether to work or shirk a worker weighs the potential loss due to forfeiture of the trust fund if caught shirking against the benefits from reduced effort this concept is used to show that the implicit bonding in upward sloping age earnings profiles is not a perfect substitute for an explicit up front performance bond or employment fee it is also shown that the second best optimal earnings profile in the absence of an up front employment fee pays total compensation in excess of market clearing in a variety of stylized cases

a note on prudencio s experimental tests of the coase propositions abstract the purpose of this note is to review prudencio s recent experimental test of the coasian propositions of neutrality and efficiency his conclusion that the propositions are statistically supported by the experimental results is not substantiated a careful examination of the design and methodology of the experiment leads to the conclusion that the experimental bargaining cannot be considered voluntary and that the results are likely to be influenced by hypothetical bias other problems with the representativeness of prudencio s participants are also discussed

pension coverage and borrowing constraints using data from the 1983 survey of consumer finances and taking a measure of borrowing constraint status as an indication of a worker s discount rate we find evidence that borrowing constrained workers are less likely to be covered by a pension plan and that the borrowing constraint effect is significant only for defined benefit plans this paper examines the extent to which differences in workers rates of time preferences can explain pension coverage outcomes we argue that workers with a high rate of time preference will avoid jobs with pensions because pension saving cannot be costlessly borrowed against and they will be more reluctant to join a defined benefit than a defined contribution plan because defined benefit plans offer less flexibility in choosing a pension saving rate the existing empirical literature on pension coverage emphasizes the role of taxes incentives administrative costs and employee perceptions of default and nonportability risks 1 this study concentrates on how the ability to borrow against pension contributions affects worker pension demand

is mandatory retirement overrated evidence from the 1970s in this paper we argue that mandatory retirement is only one aspect of a much broader system that influences an individual s retirement decision we look at responses over time to variations in mandatory retirement rules faced by a sample of private sector workers aged 62 64 in 1973 this is done within a model that specifically includes the economic incentives present in social security and pension systems we find that the impact of a mandatory retirement rule on work is considerably smaller than a simple comparison of those with and without mandatory retirement would imply

poverty alleviation in mozambique a multi market analysis of the role of food aid abstract the use of food aid in poverty alleviation programs has been hampered by two problems the inability to target to households in need and the disincentive effects on agriculture in this paper we present econometric estimates of in almost ideal demand system aids for households in maputo mozambique and develop a multi market model to show that in maputo imported yellow maize is not only self targeting but that owing to a combination of the low cross price elasticity with locally produced staples particularly white maize and cross border trade in food products the disincentive effects on domestic agriculture have been negligible

pension portability and labor market efficiency a survey of the literature this paper reviews the theoretical and empirical literature evaluating the labor market effects of policies to enhance pension portability one perspective is that reducing the cost of job change w

delayed payment contracts and a firm s propensity to hire older workers there are jobs for which firms employ older workers but tend not to hire new older workers this may be attributable in part to implicit contracts that discourage worker shirking and malfeasance by shifting compensation to the end of the contract such delayed payment contracts can introduce a form of fixed costs into the employment relationship much as with hiring and training costs these fixed costs lead firms to hire primarily young long term workers while firms employ older workers workers who are serving out the last years of their contract they tend not to hire them this paper presents empirical evidence that is consistent with this argument

employer size and labor turnover the role of pensions the well documented lower labor turnover in large firms than in smaller firms has been cited as evidence that large firms pay workers above their opportunity wage this study investigates whether t

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

pensions and indenture premia the implicit pension contract has provided a theoretical basis for the observed relation between pensions less quitting and earlier retirement but it also has encountered difficulty explaining why wages seem too high in pension firms this anomaly has been taken by some to imply that efficiency wages not pension capital losses explain why quitting is abnormally low in defined benefit pensions in this paper i pursue an alternative explanation that the implicit contract model is oversimplified because it ignores supply conditions facing long tenure firms i show that once an allowance is made for compensation required by workers for entering long term labor contracts numerous anomalous empirical observations in the pension market are explicable

public expenditures in sub saharan africa during a period of economic reforms abstract public expenditure restraint is the most direct means of reducing balance of payments and budget deficits and is consequently a key aspect of macroeconomic adjustment programs the results of this study indicate a steady increase in total central government and social services spending during 1977 1989 in sub saharan africa the growth in population however contributed to an overall erosion in per capita expenditures while total government expenditures as a share of gdp have been stable during the past decade they have declined net of interest repayments which represent an increasingly large share of total spending an analysis of spending in the three years before and after donor financed adjustment programs began reveals no pattern of increase or decrease in real levels of total and social sector expenditures or in social sector spending as a share of the total expenditures elasticities of health and education spending with respect to gdp were found to be greater than unity in recent years indicating that as countries develop social spending will constitute a larger share of gdp

pensions bonding and lifetime jobs a well known if underappreciated finding in the mobility literature is that turnover is much lower in jobs covered by pensions than in other jobs this could result from capital losses for job changes created by most benefit formulas the tendency of turnover prone individuals to avoid jobs covered by pensions or higher overall compensation levels in such jobs a switching bivariate probit model of pension coverage and turnover is developed to estimate the effect of each of these factors the results show that capital losses are the main factor responsible for lower turnover in jobs covered by pensions but self selection and compensation levels also play an important role this is the first direct evidence that bonding is important for understanding long term employment relationships

the effects of pension funds on markets performance a review the worldwide reforming process of pension systems triggered by the demographic transition and globalization has led several countries to implement multi pillar pension systems and enhance pension funds for this reason the studies on the effects that pension funds exert on markets performance have been flourishing in the last decades in this paper we provide an updated review of the empirical advances in this field of study with particular focus on the effects that pension funds produce on labour markets financial markets and economic growth