Age discrimination laws and labor market efficiency

In Lazear's model of long-term incentive contracts, age discrimination laws barring age-based involuntary terminations preclude such contracts, reduci ng efficiency.,Alternatively, such laws may serve as precommitment devices for these contracts, without preventing films from offering strong financia l incentives to induce retirement at specific ages. In this case, age discr imination laws may encourage Lazear contracts, hence increasing efficiency. We assess evidence on these alternative interpretations using variation in state and federal age discrimination laws. The evidence indicates that age discrimination la ws steepen age-earnings profiles for cohorts entering th e labor market, suggesting that these laws encourage the use of Lazear cont racts.