Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

If you need an accessible version of this item please contact JSTOR User Support

Why Is There Mandatory Retirement?

Edward P. Lazear
Journal of Political Economy
Vol. 87, No. 6 (Dec., 1979), pp. 1261-1284
Stable URL: http://www.jstor.org/stable/1833332
Page Count: 24
  • Get Access
  • Read Online (Free)
  • Download ($14.00)
  • Cite this Item
If you need an accessible version of this item please contact JSTOR User Support
Why Is There Mandatory Retirement?
Preview not available

Abstract

This paper offers an explanation of the use of mandatory-retirement clauses in labor contracts. It argues that the date of mandatory retirement is chosen to correspond to the date of voluntary retirement, but the nature of the optimal wage profile results in a discrepancy between spot wage and spot VMP (value of the worker's marginal product). This is because it is preferable to pay workers less than VMP when young and more than VMP when old. By doing so the "agency" problem is solved, so the contract with mandatory retirement is Pareto efficient. A theory of agency is presented and empirical evidence which supports the hypothesis is provided.

Page Thumbnails

  • Thumbnail: Page 
1261
    1261
  • Thumbnail: Page 
1262
    1262
  • Thumbnail: Page 
1263
    1263
  • Thumbnail: Page 
1264
    1264
  • Thumbnail: Page 
1265
    1265
  • Thumbnail: Page 
1266
    1266
  • Thumbnail: Page 
1267
    1267
  • Thumbnail: Page 
1268
    1268
  • Thumbnail: Page 
1269
    1269
  • Thumbnail: Page 
1270
    1270
  • Thumbnail: Page 
1271
    1271
  • Thumbnail: Page 
1272
    1272
  • Thumbnail: Page 
1273
    1273
  • Thumbnail: Page 
1274
    1274
  • Thumbnail: Page 
1275
    1275
  • Thumbnail: Page 
1276
    1276
  • Thumbnail: Page 
1277
    1277
  • Thumbnail: Page 
1278
    1278
  • Thumbnail: Page 
1279
    1279
  • Thumbnail: Page 
1280
    1280
  • Thumbnail: Page 
1281
    1281
  • Thumbnail: Page 
1282
    1282
  • Thumbnail: Page 
1283
    1283
  • Thumbnail: Page 
1284
    1284