Pensions as Severance Pay

50 Pages Posted: 25 Jun 2004 Last revised: 1 Aug 2022

See all articles by Edward P. Lazear

Edward P. Lazear

Stanford Graduate School of Business; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: July 1982

Abstract

Earlier claims that pensions serve as severance pay are corroborated by a new data set drawn from the 1980 Banker's Trust corporate pension plan study. A model is developed that shows how pension values which vary with the age of retirement make both workers and firms better off by moving the equilibrium in the direction of a perfect-information, first-best optimum. This requires that pension values decline with the age of retirement beyond a certain point. Evidence from the 1975 and 1980 data sets supports this claim. To the extent that any significant change has occurred between 1975 and 1980, most important is that the ratio of early retirement pension value to normal retirement pension value has increased.

Suggested Citation

Lazear, Edward P., Pensions as Severance Pay (July 1982). NBER Working Paper No. w0944, Available at SSRN: https://ssrn.com/abstract=265280

Edward P. Lazear (Contact Author)

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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