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Seniority wages and the role of firms in retirement

Wolfgang Frimmel (), Gerard Horvath (), Mario Schnalzenberger and Rudolf Winter-Ebmer ()

Journal of Public Economics, 2018, vol. 164, issue C, 19-32

Abstract: In general, retirement is seen as a pure labor supply phenomenon, but firms can have strong incentives to send expensive older workers into retirement. Based on considerations about wage costs and replacement costs, we discuss steep seniority wage profiles as incentives for firms to dismiss older workers before retirement. Conditional on individual retirement incentives, e.g., social security wealth accrual rates or health status, the steepness of the wage profile will have different incentives for workers as compared to firms to maintain the employment relationship. Using an instrumental variable approach to account for selection of workers in our firms and for reverse causality, we find that firms with higher labor costs for older workers have on average a lower job exit age and a higher incidence of golden handshakes.

Keywords: Retirement; Seniority wages; Firm incentives (search for similar items in EconPapers)
JEL-codes: J14 J26 J31 H55 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015) Downloads
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015) Downloads
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015) Downloads
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015) Downloads
Working Paper: Seniority wages and the role of firms in retirement (2015) Downloads
Working Paper: Seniority wages and the role of firms in retirement (2015) Downloads
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015) Downloads
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