Inkmann, Joachim (2006) Compensating wage differentials for defined benefit and defined contribution occupational pension scheme benefits. Discussion paper: UBS Pensions Series 042, 564. Financial Markets Group, London School of Economics and Political Science, London, UK.
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The theory of equalizing differences suggests that employer provided pension benefits should be compensated by reduced wage benefits for an employee’s given produc-tivity potential. This paper presents an empirical analysis of compensating wage differentials for occupational pension scheme benefits in the UK using the newly available English Longi-tudinal Study of Ageing. The data allows us to differentiate between Defined Benefit (DB) and Defined Contribution (DC) schemes and to consider different measures of pension bene-fits based on current contributions and changes in accrued pension benefit rights. In our pre-ferred specifications we find evidence for perfect compensating wage differentials for both occupational DB and DC pension scheme benefits.
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