TY  - JOUR
AU  - Lang,Kevin
TI  - Why Was there Mandatory Retirement? or the Impossibility of Efficient Bonding Contracts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2199
PY  - 1987
Y2  - March 1987
UR  - http://www.nber.org/papers/w2199
L1  - http://www.nber.org/papers/w2199.pdf
N1  - Author contact info:
Kevin Lang
Department of Economics
Boston University
270 Bay State Road
Boston, MA  02215
Tel: 617/353-5694
Fax: 617/353-4001
E-Mail: lang@bu.edu
AB  - Lazear has argued that hours constraints, in general, and mandatory retirement, in particular, form part of an efficient labor market contract designed to increase output by inhibiting worker shirking. Since the contract is efficient, legislative interference is welfare reducing. However, in any case where bonding is costly, the hours constraints will not be chosen optimally. Although it is theoretically possible that bonding is costless, in this case the earnings profile is indeterminate and we should never observe monitoring aimed at reducing shirking. It therefore appears that bonding should be modelled as costly. If so, the role of policy depends on the source of bonding costs, the set of feasible contracts and the policy options which are available to government.
ER  -