Explaining the Evolution of Pension Structure and Job Tenure

50 Pages Posted: 16 Sep 2004 Last revised: 12 Oct 2022

See all articles by Leora Friedberg

Leora Friedberg

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Date Written: August 2004

Abstract

Current and expected job tenure have fallen significantly over the last two decades. Over the same period, traditional defined benefit pensions, designed to reward long tenure, have become steadily less common. This paper uses a contract-theoretic matching model with moral hazard to explain changes in pension structure and job tenure. In our model, a decline in the value of existing jobs relative to new jobs reduces expected match duration and thus the appeal of DB pensions. We show that this explanation is consistent with observed trends and suggests an additional consequence of technological change that has not been closely studied.

Suggested Citation

Friedberg, Leora and Owyang, Michael T., Explaining the Evolution of Pension Structure and Job Tenure (August 2004). NBER Working Paper No. w10714, Available at SSRN: https://ssrn.com/abstract=583711

Leora Friedberg (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3225 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael T. Owyang

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

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