Explaining Pension Dynamics

Rebecca A. Luzadis, Olivia S. Mitchell

NBER Working Paper No. 3084
Issued in August 1989
NBER Program(s):Labor Studies

Some contend the US labor market will fail to adapt smoothly to an aging workforce, whereas others argue that employee pensions can and will play an important role in helping companies induce desired turnover patterns. This paper undertakes a longitudinal examination of pension retirement incentives in several dozen plans observed between about 1960 to 1980. The plans under study instituted many changes over this period, several of which enhanced the financial payoff to early retirement. These alterations included increases in benefit levels, reductions in early, normal and mandatory retirement ages, and cuts in the age at which pension present values peak (with retirement after that age penalized). We also find that simple indicators of pension plans' structural features (e.g. the plan's early retirement age) do not adequately summarize the complex financial incentives inherent in pensions, so that most of our attention is directed to analysis of financial benefit level measures. Three major explanations for observed pension outcomes are evaluated empirically. Of special policy interest is an evaluation of pension responses to changes in Social Security benefit rules. Additionally, key differences in behavior are discovered between single employer and multiemployer pension plans. We conclude that pension plan behavior is systematically related to both labor and product market characteristics, and is responsive to retirement income policy.

download in pdf format
   (414 K)

download in djvu format
   (312 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3084

Published: Luzadis, Rebbeca A. and Olivia S. Mitchell. "Explaining Pension Dynamics." Journal of Human Resources, 26, Fall 1991: 679-703 citation courtesy of

Users who downloaded this paper also downloaded* these:
Hall w2264 Investment Under Uncertainty: Theory and Tests with Industry Data
Kaplow w3709 Taxation and Risk Taking: A General Equilibrium Perspective
Mocan w3177 Business Cycles and Fertility Dynamics in the U.S.: A Vector-Autoregressive Model
Börsch-Supan and Jürges w17079 Disability, Pension Reform and Early Retirement in Germany
Card w2768 Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us