Journal Article
Defined benefit or defined contribution? A study of pension choices
Authors
Publication date
2011
Summary
We solve an empirically parameterized life-cycle model of consumption and pension choices to show how expected earnings growth and risk affect the benefits of final-salary defined benefit (DB) pension plans, relative to pension plans that are defined contribution (DC) in nature. We use micro data on the pension choices of individuals to provide evidence consistent with the model predictions: (1) individuals who expect a higher growth rate of earnings are more likely to choose DB final-salary schemes, and (2) individuals who face a higher variance of persistent income shocks are less likely to choose DB final-salary schemes. We control for cohort and age fixed effects in the empirical analysis.
Published in
Journal of Risk and Insurance
Volume and page numbers
78 , 931 -960
DOI
http://dx.doi.org/10.1111/j.1539-6975.2011.01419.x
ISSN
16
Subjects
Links
http://serlib0.essex.ac.uk/record=b1599791~S5
Notes
Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*
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