Why Is There Mandatory Retirement?

@article{Lazear1979WhyIT,
  title={Why Is There Mandatory Retirement?},
  author={Edward P. Lazear},
  journal={Journal of Political Economy},
  year={1979},
  volume={87},
  pages={1261 - 1284}
}
  • E. Lazear
  • Published 1 December 1979
  • Economics
  • Journal of Political Economy
This paper offers an explanation of the use of mandatory-retirement clauses in labor contracts. It argues that the date of mandatory retirement is chosen to correspond to the date of voluntary retirement, but the nature of the optimal wage profile results in a discrepancy between spot wage and spot VMP (value of the worker's marginal product). This is because it is preferable to pay workers less than VMP when young and more than VMP when old. By doing so the "agency" problem is solved, so the… 
Is Mandatory Retirement Overrated? Evidence from the 1970s
In this paper we argue that mandatory retirement is only one aspect of a much broader system that influences an individual's retirement decision. We look at responses over time to variations in
MANDATORY RETIREMENT AS A CLAUSE IN AN EMPLOYMENT INSURANCE CONTRACT
This paper postulates the existence of an “employment insurance contract” in which firms insure the employment of workers, at a predetermined wage, against potential, age related declines in
Why Is There Mandatory Retirement? An Empirical Reexamination.
A widely cited explanation of mandatory retirement age provisions is the "incentives" model developed and tested by Lazear. The research reported here builds upon Lazear's empirical framework by
Firms and Early Retirement: Offers that One Does Not Refuse
According to the Hutchens (1999) model, early retirement is not explained as a result of maximizing expected individual utility but rather as a demand-side phenomenon arising from a firm’s
Efficient Timing of Retirement
This study introduces a retirement decision into the class Merton model. A familiar result is that you should retire if and when the marginal utility of another year's wages is equal to the
A Test of Lazear's Theory of Delayed Payment Contracts
According to Lazear, workers and firms enter into long-term implicit contracts that discourage shirking and malfeasance by shifting compensation to the end of the contract. Such "delayed payment"
Early Retirement: Free Choice or Forced Decision?
Early retirement is usually explained as a supply-side phenomenon. However, early retirement can also be a demand-side phenomenon arising from a firm's profit maximization behavior. This paper
An Overlapping Generations Model of Wage Determination
This paper provides a novel explanation of rising wage profiles and seniority rules. It is argued that whenever a firm bargains over a wage-employment package with its whole work force, a
...
...

References

SHOWING 1-10 OF 20 REFERENCES
Retirement System Characteristics and Compensating Wage Differentials in the Public Sector
This paper presents evidence that a trade-off exists between wages and certain characteristics of retirement systems in the public sector. Cross-section econometric estimates for uniformed municipal
Wages and Employment under Uncertain Demand
This paper examines some implications of two postulates for firms' wage and employment policies. The first is that firms, or stockholders, have easier access to capital markets at lower costs or
Wage Trends as Performance Displays Productive Potential: A Model and Application to Academic Early Retirement
Wage trends over the working career are explored in a two-period model assuming that workers have different intrinsic productivities which are manifested stochastically. Firms compete for a limited
Temporary Layoffs in the Theory of Unemployment
The typical worker who is laid off is soon rehired by his original employer. This important and generally unnoticed fact requires a major reevaluation of our current theories of unemployment. This
Implicit Contracts and Underemployment Equilibria
This paper studies an industry with demand uncertainty which prompts risk-neutral firms to act both as employers and as insurers of homogeneous, risk-averse laborers. The resulting contractual
Incentives, Risk, and Information: Notes Towards a Theory of Hierarchy
This paper analyzes the role of incentives, risk, and information in determining the structure of employment contracts. In particular, we focus on the functions performed by piece rate versus time
Agency Problems and the Theory of the Firm
  • E. Fama
  • Economics
    Journal of Political Economy
  • 1980
This paper attempts to explain how the separation of security ownership and control, typical of large corporations, can be an efficient form of economic organization. We first set aside the
Law Enforcement, Malfeasance, and Compensation of Enforcers
THE new economic approach to political behavior seeks to develop a positive theory of legislation, in contrast to the normative approach of welfare economics. The new approach asks why certain
Risk shifting, layoffs, and seniority
...
...