Employer-Provided Benefit Plans, Workforce Composition and Firm Outcomes
LEHD Technical Paper No. TP-2003-06
44 Pages Posted: 3 Jan 2005
Date Written: December 2004
What do firms gain by offering benefits? Economists have proposed two payoffs: (i) benefits may be a more cost-effective form of compensation than wages for employees facing high marginal tax rates, and (ii) benefits may attract a more stable, skilled workforce. Both should improve firm outcomes, but we have little evidence on this matter. This paper exploits a rich new dataset to examine how firm productivity and survival are related to benefit offering, and finds that benefit-offering firms have higher productivity and higher survival rates. Differences in firm and workforce characteristics explain some but not all of the differences in outcomes.
Keywords: Pensions, benefits, firms, productivity, matched employer-employee data
JEL Classification: J32, J33, l23, l20
Suggested Citation: Suggested Citation