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Licensed Unlicensed Requires Authentication Published by De Gruyter August 18, 2006

Searching For Better Prospects: Endogenizing Falling Job Tenure and Private Pension Coverage

Leora Friedberg, Michael T Owyang and Tara M Sinclair

Abstract

Recent declines in job tenure have coincided with a shift away from traditional defined benefit (DB) pensions, which reward long tenure. New evidence also points to an increase in job-to-job movements by workers, and we document gains in relative wages of job-to-job movers over a similar period. We develop a search model in which firms may offer tenure-based contracts like DB pensions to reduce the incidence of costly on-the-job search by workers. Either reduced search costs or an increase in the probability of job matches can, under fairly general conditions, lower the value of deterring search and the use of DB pensions.

Published Online: 2006-8-18

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