Government pension policy and the cost of labor and capital

This article examines how the pension insurance provided by the PBGC and the tax treatment of pension plans affect the cost of labor and capital. Two important aspects of the insurance program are (1) the premium schedule and (2) an employer's liability for unfunded pension benefits (the deductible). These two aspects interact to increase the cost of capital relative to labor, especially for firms with underfunded plans.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/45413/1/10693_2004_Article_BF00119168.pd