Seniority Wages and the Role of Firms in Retirement

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

No 9192, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 the seniority wage model developed by Lazear (1979), 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 or health status, the steepness of the wage profile will have different incentives for workers as compared to firms when it comes to the retirement date. 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 are associated with lower job exit age.

Keywords: firm incentives; seniority wages; retirement (search for similar items in EconPapers)
JEL-codes: H55 J14 J26 J31 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2015-07
New Economics Papers: this item is included in nep-age, nep-bec, nep-dem and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published - publshed in: Journal of Public Economics, 2018, 164, 19 - 32

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Related works:
Journal Article: Seniority wages and the role of firms in retirement (2018)
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015)
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015)
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015)
Working Paper: Seniority wages and the role of firms in retirement (2015)
Working Paper: Seniority wages and the role of firms in retirement (2015)
Working Paper: Seniority Wages and the Role of Firms in Retirement (2015)
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