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Seniority Wages and the Role of Firms in Retirement

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

No 2015-05, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

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: retirement; seniority wages; firm incentives (search for similar items in EconPapers)
JEL-codes: J14 J26 J31 H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-bec, nep-dem and nep-lab
Date: 2015-07
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Related works:
Journal Article: Seniority wages and the role of firms in retirement (2018) 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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