TY  - JOUR
AU  - Lumsdaine,Robin L.
AU  - Stock,James H.
AU  - Wise,David A.
TI  - Efficient Windows and Labor Force Reduction
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3369
PY  - 1990
Y2  - May 1990
UR  - http://www.nber.org/papers/w3369
L1  - http://www.nber.org/papers/w3369.pdf
N1  - Author contact info:
Robin L. Lumsdaine
Kogod School of Business
American University
4400 Massachusetts Avenue NW
Washington, DC 20016
Tel: 202/885-1964
E-Mail: robin.lumsdaine@american.edu

James H. Stock
Department of Economics
Harvard University
Littauer Center M27
Cambridge, MA 02138
Tel: 617/496-0502
Fax: 617/495-7730
E-Mail: James_Stock@harvard.edu

David A. Wise
NBER
1050 Massachusetts Avenue
Cambridge, MA   02138
E-Mail: dwise@nber.org
AB  - Recently many U.S. firms have offered "window" plans that provide bonuses to a group of workers if the worker retires within a specified short time span. This paper examines a window plan at a Fortune 500 firm, and addresses two main issues. First, what was the effect of the window plan on departures? Second, assuming a variety of possible firm objectives, what would be the design of an efficient window plan? These questions are addressed using the retirement model in Stock and Wise [1988a, 1988b] . The model, estimated using data for an earlier year, predicts well out-of-sample the subsequent large increase in retirements under the window plan. We find that while the firm successfully maximized departures, if its goal was to minimize either expected future wage payments or the current cost per induced retirement, the firm could have saved more with efficient plans constructed using the model. One interpretation is that the firm was primarily interested in reducing the overall size of the labor force or in retiring older employees to allow promotion of younger employees.
ER  -