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Pensions as Severance Pay

In: Financial Aspects of the United States Pension System

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  • Edward P. Lazear

Abstract

Earlier 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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Suggested Citation

  • Edward P. Lazear, 1983. "Pensions as Severance Pay," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 57-90, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:6028
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