Adverse Selection and Incentives in an Early Retirement Program

44 Pages Posted: 30 Oct 2011

See all articles by Kenneth Whelan

Kenneth Whelan

affiliation not provided to SSRN

Ronald G. Ehrenberg

ILR-Cornell University; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Kevin F. Hallock

Cornell University; National Bureau of Economic Research (NBER)

Ronald L. Seeber

Cornell University - School of Industrial and Labor Relations

Multiple version iconThere are 2 versions of this paper

Abstract

We evaluate potential determinants of enrollment in an early retirement incentive program for non-tenure-track employees at a large university. Using administrative records on the eligible population of employees not covered by collective bargaining agreements, historical employee count and layoff data by budget units, and public information on unit budgets, we find dips in per-employee finances in a budget unit during the application year and higher recent per employee layoffs were associated with increased probabilities of eligible employee program enrollment. Our results also suggest that, on average, employees whose salaries are lower than we would predict given their personal characteristics and job titles were more likely to enroll in the early retirement program. To the extent that employees' compensation reflect their productivity, as it should under a pay system in which annual salary increases are based on merit, this finding suggests that adverse selection was not a problem with the program. That is, we find no evidence that on average the "most productive" employees took the incentive.

Keywords: retirement incentive program, adverse selection, layoff threat, university

JEL Classification: I23, J26

Suggested Citation

Whelan, Kenneth and Ehrenberg, Ronald G. and Hallock, Kevin F. and Seeber, Ronald L., Adverse Selection and Incentives in an Early Retirement Program. IZA Discussion Paper No. 6055, Available at SSRN: https://ssrn.com/abstract=1951346

Kenneth Whelan (Contact Author)

affiliation not provided to SSRN ( email )

Ronald G. Ehrenberg

ILR-Cornell University ( email )

Higher Education Research Institute
Ithaca, NY 14853-3901
United States
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National Bureau of Economic Research (NBER) ( email )

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IZA Institute of Labor Economics ( email )

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Kevin F. Hallock

Cornell University ( email )

Ithaca, NY 14853
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ronald L. Seeber

Cornell University - School of Industrial and Labor Relations ( email )

Ithaca, NY 14853-3901
United States
(607) 255-4371 (Phone)
(607) 255-7774 (Fax)

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