220 research outputs found
Not your father's pension plan: the rise of 401K and other defined contribution plans
The number of workers with a 401(k) plan grew from 7.1 million in 1983 to 38.9 million by 1993. The rapid diffusion of 401(k) and other portable defined contribution plans and the decline in defined benefit pensions represent a major change in pension structure. Old-style defined benefit pensions were designed to give a fixed income after retirement, but only for workers who stayed in a job for 20 or 30 years; workers who left early ended up with little or nothing. Resulting changes in portability, access to pension wealth, and riskiness are altering incentives for job tenure and worker mobility, retirement, and saving both before and after retirement.Pensions ; Retirement
Explaining the evolution of pension structure and job tenure
Average and expected job tenure of workers has fallen significantly over the last two decades. Workers have also experienced a major shift in pension coverage. Traditional defined benefit pensions, designed to reward long tenure, have become steadily less common, while defined contribution pensions, which are largely portable, have spread. The link between job tenure and pension trends has not been closely examined, but it offers insights about both phenomena. This paper uses a contract-theoretic matching model with moral hazard to explain changes in both pension structure and job tenure; we discuss how a richer model with job-specific human capital subject to technology shocks would yield similar results. 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 argue that these trends are linked to changes in the nature of new technologies. This explanation is consistent with observed trends in technological change, tenure, and pension structure. Our results suggest an additional consequence of technological progress that has not been closely studied.Pensions ; Retirement ; Defined benefit pension plans ; Defined contribution pension plans
Identifying technology shocks in the frequency domain
Since GalĂ [1999], long-run restricted VARs have become the standard for identifying the effects of technology shocks. In a recent paper, Francis et al. [2008] proposed an alternative to identify technology as the shock that maximizes the forecast-error variance share of labor productivity at long horizons. In this paper, we propose a variant of the Max Share identification, which focuses on maximizing the variance share of labor productivity in the frequency domain. We consider the responses to technology shocks identified from various frequency bands. Two distinct technology shocks emerge. An expansionary shock increases productivity, output, and hours at business-cycle frequencies. The technology shock that maximizes productivity in the medium and long runs instead has clear contractionary effects on hours, while increasing output and productivity.Business cycles ; Technology - Economic aspects ; Productivity
Duration dependence in monetary policy: international evidence
We study the duration of monetary regimes in a simple neo-classical Phillips curve model. The model is an extension of Owyang (2001) and Owyang and Ramey (2001). In this paper, we consider the role of the duration of inflationary regimes on the average inflation rate in an international cross-section. We find that inflationary regimes in certain countries are duration dependent but anti-inflationary regimes are not. In addition, we find that countries with high central banker turnover switch from inflationary to anti-inflationary with lower probability.Monetary policy ; Phillips curve
Who benefits from increased government spending? a state-level analysis
We simultaneously identify two government spending shocks: military spending shocks as defined by Ramey (2008) and federal spending shocks as defined by Perotti (2008). We analyze the effect of these shocks on state-level personal income and employment. We find regional patterns in the manner in which both shocks affect state-level variables. Moreover, we find differences in the propagation mechanisms for military versus nonmilitary spending shocks. The former benefits economies with larger manufacturing and retail sectors and states that receive military contracts. While nonmilitary shocks also benefit states with the proper industrial mix, they appear to stimulate economic activity in more-urban, lower-income states.Government spending policy ; Expenditures, Public
Monetary policy in a Markov-switching VECM: implications for the cost of disinflation and the price puzzle
Monetary policy VARs typically presume stability of the long-run outcomes. We introduce the possibility of switches in the long-run equilibrium in a cointegrated VAR by allowing both the covariance matrix and weighting matrix in the error-correction term to switch. We find that monetary policy alternates between sustaining long-run growth and disinflationary regimes. Allowing state changes can also help explain the price puzzle and justify the use of commodity prices as a corrective measure. Finally, we show that regime-switching has implications for disinflationary monetary policy and can explain the variety of sacrifice ratio estimates that exist in the literature.Monetary policy ; Econometric models
Business cycle measures
Business cycle measures can provide timely statistical evidence of turning points.Business cycles
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