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Pensions, the Option Value of Work, and Retirement

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  • Stock, James H
  • Wise, David A

Abstract

The effects of firm pension plan provisions on the retirement decisions of older employees are analyzed. The empirical results are based on data from a large firm, with a typical defined benefit pension plan. The "option value" of continued work is the central feature of the analysis. Estimation relies on a retirement decision rule that is close in spirit to the dynamic programming rule, but is considerably less complex than a comprehensive implementation of that rule, thus greatly facilitating the numerical analysis. Copyright 1990 by The Econometric Society.

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  • Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
  • Handle: RePEc:ecm:emetrp:v:58:y:1990:i:5:p:1151-80
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    1. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
    2. Laurence J. Kotlikoff & David A. Wise, 1989. "Employee Retirement and a Firm's Pension Plan," NBER Chapters, in: The Economics of Aging, pages 279-334, National Bureau of Economic Research, Inc.
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    8. Jeanne M. Hogarth, 1988. "Accepting an Early Retirement Bonus an Empirical Study," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 21-33.
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    10. Steven F. Venti & David A. Wise, 1989. "Aging, Moving, and Housing Wealth," NBER Chapters, in: The Economics of Aging, pages 9-54, National Bureau of Economic Research, Inc.
    11. Jonathan Feinstein & Daniel McFadden, 1989. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Chapters, in: The Economics of Aging, pages 55-92, National Bureau of Economic Research, Inc.
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    14. Laurence J. Kotlikoff & David A. Wise, 1985. "Labor Compensation and the Structure of Private Pension Plans: Evidence for Contractual versus Spot Labor Markets," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 55-88, National Bureau of Economic Research, Inc.
    15. John P. Rust, 1989. "A Dynamic Programming Model of Retirement Behavior," NBER Chapters, in: The Economics of Aging, pages 359-404, National Bureau of Economic Research, Inc.
    16. Jerry A. Hausman & David A. Wise, 1985. "Social Security, Health Status, and Retirement," NBER Chapters, in: Pensions, Labor, and Individual Choice, pages 159-192, National Bureau of Economic Research, Inc.
    17. B. Douglas Bernheim, 1987. "Dissaving after Retirement: Testing the Pure Life Cycle Hypothesis," NBER Chapters, in: Issues in Pension Economics, pages 237-280, National Bureau of Economic Research, Inc.
    18. Douglas W. Phillips & David A. Wise, 1987. "Military versus Civilian Pay: A Descriptive Discussion," NBER Chapters, in: Public Sector Payrolls, pages 19-46, National Bureau of Economic Research, Inc.
    19. Howard L. Frant & Herman B. Leonard, 1987. "Promise Them Anything: The Incentive Structures of Local Public Pension Plans," NBER Chapters, in: Public Sector Payrolls, pages 215-242, National Bureau of Economic Research, Inc.
    20. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
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    22. Jeremy I. Bulow, 1981. "Early Retirement Pension Benefits," NBER Working Papers 0654, National Bureau of Economic Research, Inc.
    23. Jerry A. Hausman & David A. Wise, 1980. "Discontinuous Budget Constraints and Estimation: The Demand for Housing," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 75-96.
    24. Michael D. Hurd & Michael J. Boskin, 1984. "The Effect of Social Security on Retirement in the Early 1970s," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 767-790.
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    26. Alan S. Blinder & Roger H. Gordon & Donald E. Wise, 1980. "Reconsidering the Work Disincentive Effects of Social Security," NBER Working Papers 0562, National Bureau of Economic Research, Inc.
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