TY  - JOUR
AU  - Lazear,Edward P.
TI  - Severance Pay, Pensions, and Efficient Mobility
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 854
PY  - 1982
Y2  - February 1982
UR  - http://www.nber.org/papers/w0854
L1  - http://www.nber.org/papers/w0854.pdf
N1  - Author contact info:
Edward P. Lazear
Graduate School of Business
Stanford University
Stanford, CA 94305
Tel: 650/723-9136
Fax: 650/723-0498
E-Mail: lazear@stanford.edu
AB  - This paper argues that pensions are used as severance pay devices in an efficient compensation scheme. The major points of the study are: (1) Severance pay, which takes the form of higher pension values for early retirement, is widespread. (2) A major reason for the existence of pensions is the desire to provide an incentive mechanism that can also function as an efficient severance pay device. It is incorrect to think of pensions merely as a tax-deferred savings account. (3) The wage rates that older workers receive exceed their marginal products. This is evidenced by the fact that employers are willing to buy them out with higher pensions if they retire early. These conclusions are based upon examination of a data set which was generated as part of this study. That data set contains detailed information on 244 of the largest pension plans in the country, covering about 8 million workers.
ER  -