Rational Decision Rules for Early Retirement Inducements Contained in Corporate Pension Plans
DOI:
https://doi.org/10.1016/1057-0810(91)90049-5Abstract
This article presents a net present value (NPV) model of early pension subsi- dies. 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. 77zeJournaE of Risk and Insurance, Vol. LVIII, No. 1 (March 1991), pp. 101-108. (Reprinted with permission of The Journal of Risk and Insurance.)
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