This paper develops a model, with deferred compensation and severance pay, which predicts that workers bear all the costs and receive all the returns of human capital investments, and that specific investments yield higher returns than more general investments. The model also predicts that pensions, which provide an efficient means of deferring compensation, will be positively related to specific human capital investments. Evidence from the NLS of Mature Men confirm these predictions; participation in company-sponsored training programs, which proxies for specific investments, increases the probability of pension receipt and the level of benefits received. More general training outside the firm has a much smaller effect on pensions.
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