Volume 28, Number 3 (Summer) 1993
Allen, Steven G., Robert L. Clark, and Ann A. McDermed. 1993. "Pensions, Bonding, and Lifetime Jobs." Journal of Human Resources 28(3):463-481.
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 bivaraite 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.
Steven G. Allen is professor of economics and business management at North Carolina State University and a research associate at the National Bureau of Economic Research. Robert L. Clark is professor and interim head of the Division of Economics and Business at North Carolina State University. Ann A. McDermed is associate professor of business management at North Carolina State University. The Department of Labor supported this research project under contract no. J-9-M-5-0049. Allen was also supported by North Carolina State University. Olivia Mitchell, Kerry Smith, Richard Ippolito, Dam Hamermesh, Don Parsons, Bruce Fallick, Dale Ballou, and seminar participants at Indiana University, the University, the University of North Carolina, the National Bureau of Economic Research Summer Institute Workshops on Labor Studies and Aging, North Carolina State University, the University of South Carolina, Vanderbilt University, Miami University, and the 1989 North American Winter Meeting of the Econometric Society have given us helpful comments. Linda Shumaker, Myra McCrickard, and Fred Gale provided research assistance. The data used in this article can be obtained beginning in December 1993 through December 1996 from the authors at the following address: Department of Business Management, North Carolina State University, Box 7229, Raleigh, NC 27695-7229.
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