NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Pensions, Bonding, and Lifetime Jobs

Steven G. Allen, Robert L. Clark, Ann A. McDermed

NBER Working Paper No. 3688
Issued in April 1991
NBER Program(s):   LS

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.

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Document Object Identifier (DOI): 10.3386/w3688

Published: Journal of Human Resources, Summer 1993, vol. 28, no. 3, p. 463-481

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