Pensions as Severance Pay
AbstractEarlier 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.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0944.
Date of creation: Jul 1982
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Publication status: published as Lazear, Edward P. "Pensions as Severance Pay." Financial Aspects of the U.S . Pension System, ed. by Zvi Bodie and John B. Shoven. Chicago: Universityof Chicago Press, (1984), pp. 57-85.
Note: LS PE
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