Teacher Pension Plan Incentives, Retirement Decisions, and Workforce Quality

Working Paper Number: 
WP 18-15

We analyze late-career teacher turnover induced by pension incentives. Using longitudinal data with performance measures for Tennessee public school teachers, we find higher quality teachers are less likely to retire conditional on age and experience. To quantify the effects of pension incentives, we estimate a structural model for retirement and find that high quality teachers have a lower disutility for teaching relative to retirement. We use the structural estimates to simulate the effect of changes in retirement incentives.  Enhancements to traditional plans accelerate teacher retirement, whereas targeted retention bonuses delay retirement and retain high quality teachers at relatively modest cost.

JEL Codes: 
I21, J26, J38