SHORTER ARTICLES: Rational Decision Rules for Early Retirement Inducements Contained in Corporate Pension Plans ABSTRACT

This article presents a net present value (NPV) model of early pension subsidies. The model's theoretical basis is the compensating differentials-lifetime contracts framework of the labor market setting which gives rise to pension plans. The NPV model effectively integrates early pension subsid...

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Bibliographic Details
Published in:The Journal of risk and insurance 1991-03, Vol.58 (1), p.101
Main Author: Nader, Jihad S
Format: Article
Language:English
Subjects:
Age
Collective bargaining
Cost control
Discount rates
Early retirement
Expected values
Labor force
Labor market
Liberalization
Net present value
Pension plans
Productivity
Provisions
Retirement benefits
Stockholders
Subsidies
Wage differential
Wages & salaries
Workers
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Summary:This article presents a net present value (NPV) model of early pension subsidies. The model's theoretical basis is the compensating differentials-lifetime contracts framework of the labor market setting which gives rise to pension plans. The NPV model effectively integrates early pension subsidies into the shareholder wealth maximization framework of corporate finance. Within this framework, the article develops rational decision rules for early pension subsidies, and employs these rules to provide a corporate finance perspective on the pension-wage tradeoff of the firm's labor force.
ISSN:0022-4367
1539-6975