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Author: Dorsey, Stuart
Resulting in 1 citation.
1. Cornwell, Christopher
Dorsey, Stuart
Mehrzad, Nasser
Opportunistic Behavior by Firms in Implicit Pension Contracts
Journal of Human Resources 26,4 (Fall 1991): 704-725.
Cohort(s): Older Men
Publisher: University of Wisconsin Press
Keyword(s): Behavior; Inflation; Pensions; Retirement/Retirement Planning

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 many also create an incentive for opportunistic 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 NLS of Older Men to test whether such actions by employers are systematic. It is estimated 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. No evidence was found 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. [MGMT CONTENTS]
Bibliography Citation
Cornwell, Christopher, Stuart Dorsey and Nasser Mehrzad. "Opportunistic Behavior by Firms in Implicit Pension Contracts." Journal of Human Resources 26,4 (Fall 1991): 704-725.