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Promotion and Optimal Retirement


  • Stern, Steven


In this paper, a firm maximizes profits over choices of wage schedul es and hiring schedules in a model with (1) turnover costs, (2) a pro ductivity function that depends on position and experience, and (3) employee utility functions that depend on monetary compensation and position. It is shown that firms may have reason to encourage employe es to retire before their reservation wage is greater than their marg inal product. However, if an alternative definition of marginal produ ct is used, the usual relation holds. Copyright 1987 by University of Chicago Press.

Suggested Citation

  • Stern, Steven, 1987. "Promotion and Optimal Retirement," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 107-123, October.
  • Handle: RePEc:ucp:jlabec:v:5:y:1987:i:4:p:s107-23

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    References listed on IDEAS

    1. Masanori Hashimoto & Ben T. Yu, 1980. "Specific Capital, Employmemt Contracts, and Wage Rigidity," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 536-549, Autumn.
    2. Hall, Robert E & Lazear, Edward P, 1984. "The Excess Sensitivity of Layoffs and Quits to Demand," Journal of Labor Economics, University of Chicago Press, vol. 2(2), pages 233-257, April.
    3. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-9.
    4. Hayes, Beth, 1984. "Unions and Strikes with Asymmetric Information," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 57-83, January.
    5. Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
    6. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    7. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc.
    8. repec:fth:prinin:147 is not listed on IDEAS
    9. Jarrell, Gregg A, 1981. "The Economic Effects of Federal Regulation of the Market for New Security Issues," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 613-675, December.
    10. John G. Cragg & Russell S. Uhler, 1970. "The Demand for Automobiles," Canadian Journal of Economics, Canadian Economics Association, vol. 3(3), pages 386-406, August.
    11. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    12. Michael G. Abbott, 1982. "Specification Tests of Quarterly Econometric Models of Aggregate Strike Frequency in Canada," Working Papers 527, Princeton University, Department of Economics, Industrial Relations Section..
    13. repec:pri:indrel:dsp01k0698750j is not listed on IDEAS
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    Cited by:

    1. Steven Stern & Petra Todd, 2000. "A Test Of Lazear’S Mandatory Retirement Model," Virginia Economics Online Papers 391, University of Virginia, Department of Economics.
    2. repec:iab:iabzaf:v:42:i:4:p:311-324 is not listed on IDEAS
    3. Bellmann, Lutz & Janik, Florian, 2007. "Firms and Early Retirement: Offers That One Does Not Refuse," IZA Discussion Papers 2931, Institute for the Study of Labor (IZA).
    4. Justina A.V. Fischer & Alfonso Sousa-Poza, 2006. "The Institutional Determinants of Early Retirement in Europe," University of St. Gallen Department of Economics working paper series 2006 2006-08, Department of Economics, University of St. Gallen.
    5. David Dorn & Alfonso Sousa-Poza, 2005. "Early Retirement: Free Choice or Forced Decision," CESifo Working Paper Series 1542, CESifo Group Munich.
    6. Bellmann, Lutz & Janik, Florian, 2010. "Betriebe und Frühverrentung: Angebote, die man nicht ablehnt (Firms and early retirement: offers that one does not refuse )," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 42(4), pages 311-324.

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