Pensions, the Option Value of Work, and Retirement

James Stock and David Wise ()

Econometrica, 1990, vol. 58, issue 5, 1151-80

Abstract: The effects of firm pension plan provisions on the retirement decisions of older employees are analyzed. The empirical results are based on data from a large firm, with a typical defined benefit pension plan. The "option value" of continued work is the central feature of the analysis. Estimation relies on a retirement decision rule that is close in spirit to the dynamic programming rule, but is considerably less complex than a comprehensive implementation of that rule, thus greatly facilitating the numerical analysis. Copyright 1990 by The Econometric Society.

Date: 1990
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Working Paper: Pensions, The Option Value of Work, and Retirement (1988)
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