Pension Portability and Labor Market Efficiency: A Survey of the Literature

Abstract

This paper reviews the theoretical and empirical literature evaluating the labor market effects of policies to enhance pension portability. One perspective is that reducing the cost of job change will result in a more efficient allocation of workers. In contrast, long-term employment contract models suggest that incentives established by nonportable pensions may enhance efficiency by discouraging quits when there are job-specific productivity gains. No empirical studies have produced estimates conclusively showing that workers covered by pensions are more productive than other workers. Various indirect evidence, however—for example, on the relationship between pensions and wages, the pattern of pension coverage across workers and jobs, and the effect of pensions on layoffs—is consistent with pension-related productivity gains.

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