Recently many U.S. firma have offered "window" plans that provide bonuses
to a group of workers if the worker retires within a specified short time
span. This paper examines a window plan at a Fortune 500 firm, and addresses
two main issues. First, what was the effect of the window plan on departures?
Second, assuming a variety of possible firm objectives, what would be the
design of an efficient window plan? These questions are addressed using the
retirement model in Stock and Wise [1988a, 1988b] . The model, estimated using
data for an earlier year, predicts well out-of-sample the subsequent large
increase in retirements under the window plan. We find that while the firm
successfully msximized departures, if its goal was to minimize either expected
future wage payments or the current cost per induced retirement, the firm
could have saved more with efficient plans constructed using the model. One
interpretation is that the firm was primarily interested in reducing the
overall size of the labor force or in retiring older employees to allow
promotion of younger employees.
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