Adverse Selection and Incentives in an Early Retirement Program

Kenneth T. Whelan, Ronald Ehrenberg, Kevin F. Hallock and Ronald L. Seeber

No 17538, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We evaluate potential determinants of enrollment in an early retirement incentive program for non-tenure-track employees of a large university. Using administrative record on the eligible population of employees not covered by collective bargaining agreements, historical employee count and layoff data by budget units, and public information on unit budgets, we find dips in per-employee finance in a budget unit during the application year and higher recent per employee layoffs were associated with increased probabiliites of eligible employee program enrollment. Our results also suggest, on average, that employees whose salaries are lower than we would predict given their personal characteristics and job titles were more likely to enroll in the early retirement program. To the extent that employees' compensation reflects their productivity, as it should under a pay system in which annual salary increases are based on merit, this finidng suggests that adverse selection was not a problem with the program. That is, we find no evidence that on average the "most productive" employees took the incentive.

JEL-codes: I23 J26 J33 (search for similar items in EconPapers)
Date: 2011-10
New Economics Papers: this item is included in nep-age, nep-cta and nep-lab
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Published as “Adverse Selection and Incentives in Early Retirement Programs” (with K. Whelan, K. Hallock, and R. Seeber) Research in Labor Economics (2012)

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Chapter: Adverse Selection and Incentives in an Early Retirement Program (2012)
Working Paper: Adverse Selection and Incentives in an Early Retirement Program (2011)
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