Cost saving and the freezing of corporate pension plans

Joshua D. Rauh, Irina Stefanescu and Stephen Zeldes

Journal of Public Economics, 2020, vol. 188, issue C

Abstract: Companies that freeze defined benefit pension plans save the equivalent of 13.5% of the long-horizon payroll of current employees. Furthermore, firms with higher prospective accruals are more likely to freeze their plans. Cost savings would not be possible in a benchmark model in which i) all workers receive compensation equal to their marginal product and ii) workers value equally all identical-cost forms of pension benefits. We find evidence consistent both with firms' reneging on implicit contracts that would have provided workers with high pension accruals later in their careers and with shifts in employee valuation of different forms of retirement benefits.

Keywords: Pensions; Pension freezes; Retirement; Wages; Labor compensation; Firm value (search for similar items in EconPapers)
JEL-codes: G14 G23 G32 J31 J32 J33 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S004727272030075X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Cost Saving and the Freezing of Corporate Pension Plans (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:188:y:2020:i:c:s004727272030075x

DOI: 10.1016/j.jpubeco.2020.104211

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().