Adverse Selection and Incentives in an Early Retirement Program
AbstractWe evaluate potential determinants of enrollment in an early retirement incentive program for non-tenure-track employees at a large university. Using administrative records on the eligible population of employees not covered by collective bargaining agreements, historical employee count and layoff data by budget units, and public information on unit budgets, we find dips in per-employee finances in a budget unit during the application year and higher recent per employee layoffs were associated with increased probabilities of eligible employee program enrollment. Our results also suggest that, on average, employees whose salaries are lower than we would predict given their personal characteristics and job titles were more likely to enroll in the early retirement program. To the extent that employees' compensation reflect their productivity, as it should under a pay system in which annual salary increases are based on merit, this finding suggests that adverse selection was not a problem with the program. That is, we find no evidence that on average the "most productive" employees took the incentive.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6055.
Length: 47 pages
Date of creation: Oct 2011
Date of revision:
Publication status: published in: Research in Labor Economics, 2012, Vol. 36, 159-190
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Other versions of this item:
- Kenneth T. Whelan & Ronald G. Ehrenberg & Kevin F. Hallock & Ronald L. Seeber, 2011. "Adverse Selection and Incentives in an Early Retirement Program," NBER Working Papers 17538, National Bureau of Economic Research, Inc.
- I23 - Health, Education, and Welfare - - Education - - - Higher Education and Research Institutions
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-07 (All new papers)
- NEP-CTA-2011-11-07 (Contract Theory & Applications)
- NEP-LAB-2011-11-07 (Labour Economics)
- NEP-LMA-2011-11-07 (Labor Markets - Supply, Demand, & Wages)
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