Pensions and Productivity Stuart Dorsey, Christopher Cornwell, and David Macpherson First Chapter | Table of Contents 139 pp. 1998 $40.00 cloth 978-0-88099-186-5 $16.00 paper 978-0-88099-185-8 Employers typically view their investment in pension plans as a means of providing retirement income for their workers. Economists, on the other hand, view pension programs as a way to increase workplace productivity. Dorsey, Cornwell and Macpherson explore the theoretical and empirical basis for this perspective and, in the process, offer a thorough discussion on the productivity theory of pensions. They begin with a historical review of private pension practices and government policies related to pensions, including tax rules and regulations. Also shown are the penalties to workers leaving jobs covered by defined-benefit pension plans, and the retirement incentives created by defined-benefit plans. The authors also discuss the relationship between defined-contribution plans and productivity. Next, the authors review employment models in which specific training and monitoring costs generate job-specific productivity gains. Included is a discussion of how mechanisms to discourage early quitting or late retirement help enforce long-term employment contracts. Pension incentives are compared with ideal solutions. Dorsey, Cornwell, and Macpherson review a number of empirical studies which test the pension-productivity hypothesis, then present new estimates of productivity gains for firms sponsoring defined-benefit plans. They ask, "Is the growing market share of defined-contribution plans, at the expense of defined-benefit plans, evidence that productivity gains from defined-benefit plans are diminishing?" The authors also present new empirical evidence which suggests a link between pension incentives and employee training. |