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

Pensions and Income Dynamics

Links

http://serlib0.essex.ac.uk/record=b1599791~S5

Notes

Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*

#519999