THE IMPACT OF HUMAN-CAPITAL INVESTMENTS ON PENSION BENEFITS

This article develops a model, with deferred compensation and severanc e pay, that predicts that workers bear all the costs and receive all t he returns of human capital investments and that specific investments yield higher returns than general investments. This model also predict s that pensions, which efficiently defer compensation, will be positiv ely related to specific investments. Evidence from the National Longit udinal Survey of Older Men confirms these predictions; participation i n company-sponsored training programs, proxying for specific investmen ts, increases the probability of pension receipt and the level of bene fits. More general training outside the firm has much smaller effects on pensions.