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Pensions, the Option Value of Work, and Retirement

  • Stock, James H
  • Wise, David A

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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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 58 (1990)
Issue (Month): 5 (September)
Pages: 1151-80

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Handle: RePEc:ecm:emetrp:v:58:y:1990:i:5:p:1151-80
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  1. Alan L. Gustman & Thomas L. Steinmeier, 1983. "A Structural Retirement Model," NBER Working Papers 1237, National Bureau of Economic Research, Inc.
  2. 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.
  3. Richard V. Burkhauser, 1980. "The early acceptance of social security: An asset maximization approach," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 33(4), pages 484-492, July.
  4. 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.
  5. 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.
  6. Laurence J. Kotlikoff & David A. Wise, 1987. "Employee Retirement and a Firm's Pension Plan," NBER Working Papers 2323, National Bureau of Economic Research, Inc.
  7. Michael D. Hurd & John B. Shoven, 1982. "The Economic Status of the Elderly," NBER Working Papers 0914, National Bureau of Economic Research, Inc.
  8. Edward P. Lazear, 1982. "Pensions as Severance Pay," NBER Working Papers 0944, National Bureau of Economic Research, Inc.
  9. G. Burtless & J. A. Hausman, 1977. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiment," Working papers 211, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Burtless, Gary, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 781-805, October.
  11. Steven F. Venti & David A. Wise, 1985. "Moving and Housing Expenditure: Transaction Costs and Disequilibrium," NBER Working Papers 1012, National Bureau of Economic Research, Inc.
  12. 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.
  13. 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.
  14. Michael D. Hurd & Michael J. Boskin, 1981. "The Effect of Social Security on Retirement in the Early 1970s," NBER Working Papers 0659, National Bureau of Economic Research, Inc.
  15. 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.
  16. Olivia S. Mitchell & Gary S. Fields, 1981. "The Effects of Pensions and Earnings on Retirement: A Review Essay," NBER Working Papers 0772, National Bureau of Economic Research, Inc.
  17. 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.
  18. 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.
  19. 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.
  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.
  21. Hausman, Jerry A & Wise, David A, 1980. "Discontinuous Budget Constraints and Estimation: The Demand for Housing," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 75-96, January.
  22. Richard V. Burkhauser, 1979. "The Pension Acceptance Decision of Older Workers," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 63-75.
  23. Jeremy I. Bulow, 1981. "Early Retirement Pension Benefits," NBER Working Papers 0654, National Bureau of Economic Research, Inc.
  24. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
  25. 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.
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