Training and Pensions: Substitutes or Complements

UC Berkeley Working Paper No. 68

28 Pages Posted: 1 Sep 1998

See all articles by Michael Reich

Michael Reich

University of California, Berkeley - Department of Economics

Teresa Ghilarducci

Schwartz Center for Economic Policy Analysis (SCEPA); The New School for Social Research

Date Written: April 1998

Abstract

We compare firm-optimizing and institutional models of labor contracts to investigate how certain types of pension plans affect training. Unlike previous studies, we consider an expanded voice model of training and pension coverage in which worker and union preferences feed back upon firm decisions, and we test for this bi-directional causality between pensions and training. The data consist of merged 1991 CPS samples, using the January training supplement and the March and April files, which contain information on pension coverage and union membership. When pension coverage is treated as endogenous in a two-stage least squares regression, pensions have a negative effect upon training, and they can be viewed as substitutes. This finding is inconsistent with the standard view that firms optimize training expenditures by providing pensions. In contrast, when pension coverage is in a defined benefit multi-employer plan, training and pensions are complements, consistent with both optimizing and institutional models.

JEL Classification: J26, J60

Suggested Citation

Reich, Michael and Ghilarducci, Teresa and Ghilarducci, Teresa, Training and Pensions: Substitutes or Complements (April 1998). UC Berkeley Working Paper No. 68, Available at SSRN: https://ssrn.com/abstract=121382 or http://dx.doi.org/10.2139/ssrn.121382

Michael Reich (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Teresa Ghilarducci

Schwartz Center for Economic Policy Analysis (SCEPA) ( email )

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5th Floor
New York, NY 10027
United States

The New School for Social Research ( email )

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New York, NY 10003
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