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E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 4, No. 1: January 16, 2003
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Publisher: LSN Employment, Labor, Compensation & Pension Journals
a division of
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and Social Science Research Network (SSRN)
Editor: PAMELA PERUN
Urban Institute
Mailto:pamela@planetnow.com
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T A B L E of C O N T E N T S
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NEW and FORTHCOMING ARTICLES
"The Cost of Pension Insurance"
Journal of Risk & Insurance, Vol. 69, No. 2, pp. 121-170,
2002
STEVEN BOYCE
Pension Benefit Guaranty Corp.
RICHARD IPPOLITO
George Mason University School of Law
"A Strategy for Active Ageing"
International Social Security Review, Vol. 55, pp. 121-139,
2002
ALAN C. WALKER
University of Sheffield - Department of
Sociological Studies
WORKING PAPERS
"The Human Resource Business Process Outsourcing Industry: The
BP-Exult Partnership"
PAUL S. ADLER
Marshall School of Business, University of Souther
"Why Have Health Expenditures as a Share of GDP Risen So Much?"
CHARLES I. JONES
University of California, Berkeley
Department of Economics
National Bureau of Economic Research (NBER)
"Retirement and the Stock Market Bubble"
ALAN L. GUSTMAN
Dartmouth College
Department of Economics
National Bureau of Economic Research (NBER)
THOMAS STEINMEIER
Texas Tech University
Economics
National Bureau of Economic Research (NBER)
"Social Security Programs and Retirement Around the World: Micro
Estimation"
JONATHAN GRUBER
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
DAVID A. WISE
National Bureau of Economic Research (NBER)
Harvard University
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N E W and F O R T H C O M I N G Articles
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"The Cost of Pension Insurance"
Journal of Risk & Insurance, Vol. 69, No. 2, pp. 121-170,
2002
BY: STEVEN BOYCE
Pension Benefit Guaranty Corp.
RICHARD IPPOLITO
George Mason University School of Law
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=314354
Contact: RICHARD IPPOLITO
Email: Mailto:rippolit@gmu.edu
Postal: George Mason University School of Law
3301 N. Fairfax Drive
Arlington, VA 22201 UNITED STATES
Phone: 703-993-8243
Fax: 713-993-8124
Co-Auth: STEVEN BOYCE
Email: not available
Postal: Pension Benefit Guaranty Corp.
Washington, DC 20005-4026 UNITED STATES
ABSTRACT:
This article estimates the cost of the federal pension insurance
program. Pension insurance claims have an important market-risk
component, which means that the cost of the exposure cannot be
estimated by discounting future claims by the risk-free rate.
Moreover, owing to the complexity of the insurance contract, its
price cannot be estimated with known options formulas without
introducing an error of nonquantifiable magnitude. To circumvent
these problems, we model the insurance program in its full
complexity and use a Monte Carlo method. By hedging the exposure
with a dynamic premium policy that offloads the market risk to
the insureds, one can calculate the risk-free, or actuarial,
cost of that policy. One can also characterize the nature of the
subsidy and its structure across insured plans. Finally, we
provide an estimate of the implicit cost of the hedge function
that taxpayers currently are providing for zero remuneration.
The model shows that simple contingent claims models of pension
insurance result in a price that is about triple the true market
cost of the insurance, and that pension insurance models that
ignore market risk understate the cost by half. The solution
demonstrates the broad characteristics that might characterize a
credible private-sector version of pension insurance.
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"A Strategy for Active Ageing"
International Social Security Review, Vol. 55, pp. 121-139,
2002
BY: ALAN C. WALKER
University of Sheffield - Department of
Sociological Studies
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=309071
Contact: ALAN C. WALKER
Email: Mailto:a.c.walker@sheffield.ac.uk
Postal: University of Sheffield - Department of Sociological
Studies
Western Bank
Sheffield S10 2TN, UNITED KINGDOM
ABSTRACT:
This article argues that a strategy of active ageing, by linking
the key policy domains of employment, pensions, retirement,
health and citizenship, provides a sound basis for
industrialized countries to respond to the challenges presented
by population ageing. The article outlines the genesis of the
concept of active ageing and the principles that should be
embodied in a modernized, comprehensive approach fit for the
twenty-first century. It then considers the potential for active
ageing to address problems in the five key policy domains.
Finally the article sets out a strategy on active ageing and
illustrates how it might be operationalized at different stages
of the life cycle. In conclusion the potentially beneficial
nature of a comprehensive strategy on active ageing is
emphasized: it represents the unusual combination of a morally
correct policy that also makes sound economic sense.
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W O R K I N G P A P E R Abstracts
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"The Human Resource Business Process Outsourcing Industry: The
BP-Exult Partnership"
BY: PAUL S. ADLER
Marshall School of Business, University of Souther
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=317502
Contact: PAUL S. ADLER
Email: Mailto:padler@usc.edu
Postal: Marshall School of Business, University of Souther
Los Angeles, CA 90089 UNITED STATES
Phone: 213-740-0728
Fax: 213-740-3582
ABSTRACT:
The Human Resource Business Process Outsourcing industry
(HR-BPO) represented $21.7 billion in revenue in 2000 and over
8% of total HR spending that year, an even larger proportion
among large firms, and growing rapidly. Proponents argue that
outsourcing will re-energizing HR: in-house, strategic functions
will be staffed by highly effective contributors, and
outsourced, transactional HR processes will be managed by firms
for whom they are truly the core business. Others doubt that the
strategic aspects of HR can be separated so cleanly from the
operating aspects and are therefore more skeptical of the
outsourcing trend. This paper first synthesizes the theoretical
literature on make-buy to identify the contractual, technical,
and strategic factors involved. I then describe the structure of
the HR-BPO industry. Against this backdrop, I discuss one of the
more visible recent HR-BPO deals, the agreement between BP-Amoco
and the Exult.
Keywords: Human Resource Management, outsourcing
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"Why Have Health Expenditures as a Share of GDP Risen So Much?"
BY: CHARLES I. JONES
University of California, Berkeley
Department of Economics
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=352041
Paper ID: NBER Working Paper No. W9325
Date: November 2002
Contact: CHARLES I. JONES
Email: Mailto:chad@econ.berkeley.edu
Postal: University of California, Berkeley
Department of Economics
549 Evans Hall #3880
Berkeley, CA 94720-3880 UNITED STATES
Paper Requests:
Full-Text downloads are available from SSRN Online for $5.
ABSTRACT:
Aggregate health expenditures as a share of GDP have risen in
the United States from about 5 percent in 1960 to nearly 14
percent in recent years. Why? This paper explores a simple
explanation based on technological progress. Medical advances
allow diseases to be cured today, at a cost, that could not be
cured at any price in the past. When this technological progress
is combined with a Medicare-like transfer program to pay the
health expenses of the elderly, the model is able to reproduce
the basic facts of recent U.S. experience, including the large
increase in the health expenditure share, a rise in life
expectancy, and an increase in the size of health-related
transfer payments as a share of GDP.
JEL Classification: I1, O40
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"Retirement and the Stock Market Bubble"
BY: ALAN L. GUSTMAN
Dartmouth College
Department of Economics
National Bureau of Economic Research (NBER)
THOMAS STEINMEIER
Texas Tech University
Economics
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=364748
Paper ID: NBER Working Paper No. W9404
Date: December 2002
Contact: ALAN L. GUSTMAN
Email: Mailto:ALAN.L.GUSTMAN@DARTMOUTH.EDU
Postal: Dartmouth College
Department of Economics
6106 Rockefeller Center
Hanover, NH 03755 UNITED STATES
Phone: 603-646-2641
Fax: 603-646-2122
Co-Auth: THOMAS STEINMEIER
Email: Mailto:Thomas.Steinmeier@TTU.EDU
Postal: Texas Tech University
Economics
Lubbock, TX 79409-2101 UNITED STATES
Paper Requests:
Full-Text downloads are available from SSRN Online for $5.
ABSTRACT:
This paper specifies and estimates a structural dynamic
stochastic model of the way individuals make retirement and
saving choices in an uncertain world, and applies that model to
analyze the effects of the stock market bubble on retirement
behavior. The model includes individual variation both in
retirement preferences and in time preferences. Estimates are
based on information covering the period 1992 through 2000 from
the Health and Retirement Study (HRS), a panel survey of
retirement age respondents and their spouses. The extraordinary
returns in the stock market in the late 1990's, which more than
doubled stock prices and unexpectedly increased the value of a
mixed portfolio by nearly 60 percent, increased retirement for
the HRS sample of workers by over 3 percentage points by the
turn of the century and would have decreased the average
retirement age by about a quarter of a year if it had not been
interrupted. The subsequent decline in the market, which very
nearly wiped out the gains that had been made during the
preceding surge, effectively neutralized the effect of the
preceding stock market gains on retirement. The effects of the
bubble were to increase retirement as long as the bubble
continued, but any continuing effects of the bubble after its
end will probably be minimal.
JEL Classification: J26, J14, J32, E21, D31, D91, I3, C61, H55
______________________________
"Social Security Programs and Retirement Around the World: Micro
Estimation"
BY: JONATHAN GRUBER
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
DAVID A. WISE
National Bureau of Economic Research (NBER)
Harvard University
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=364751
Paper ID: NBER Working Paper No. W9407
Date: December 2002
Contact: JONATHAN GRUBER
Email: Mailto:gruberj@mit.edu
Postal: Massachusetts Institute of Technology (MIT)
Department of Economics
Room E52-355
50 Memorial Drive
Cambridge, MA 02142 UNITED STATES
Phone: 617-253-8892
Fax: 617-253-1330
Co-Auth: DAVID A. WISE
Email: Mailto:DWISE@NBER.ORG
Postal: National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138 UNITED STATES
Paper Requests:
Full-Text downloads are available from SSRN Online for $5.
ABSTRACT:
This is the introduction to and summary of the second stage of a
international research project to study the relationship between
social security provisions and retirement. The project relies on
the analyses of a large group of economists in 12 countries who
conduct the analysis for each of their countries. In the first
stage we documented the enormous disincentives for continued
work at older ages in many countries. The introduction to the
first volume from the project concluded with a striking graph
showing a strong relationship across countries between social
security program incentives to retire and the proportion of
older persons out of the labor force. The results in this volume
show the large magnitude of these effects. Across 12 countries
with very different social security programs and labor market
institutions, the results consistently show that program
incentives accord strongly with retirement decisions. The
magnitude is illustrated by the simulations reported in each
country paper. Considering the average across all countries, a
reform that delays benefit eligibility by three years would
likely reduce the proportion of men 56 to 65 out of the labor
force between 23 and 36 percent, perhaps closer to 36 percent in
the long run. On the other hand, an illustrative 'common reform'
- with early retirement at age 60, normal retirement age 65, and
actuarial reduction in benefits between 65 and 60 - has very
disparate effects across the countries, depending on the
provisions of the current program in each country. There is a
strong correspondence between the simulation results and a
priori expectations. The results leave little doubt that social
security incentives have a strong effect on retirement
decisions. And the estimates show that the effect is similar in
countries with very different cultural histories, labor market
institutions, and other social characteristics. While countries
may differ in many respects, the employees in all countries
react similarly to social security retirement incentives. The
simulated effects of illustrative reforms reported in the
country papers make clear that changes in the provisions of
social security programs would have very large effects on the
labor force participation of older employees.