IDEAS home Printed from https://ideas.repec.org/a/tpr/edfpol/v1y2006i3p316-348.html
   My bibliography  Save this article

The Effects of Defined Benefit Pension Incentives and Working Conditions on Teacher Retirement Decisions

Author

Listed:
  • Joshua Furgeson

    (Project Coordinator, Argosy Foundation, Milwaukee, WI)

  • Robert P. Strauss

    (H. John Heinz III School of Public Policy and Management, Carnegie-Mellon University)

  • William B. Vogt

    (H. John Heinz III School of Public Policy and Management, Carnegie-Mellon University)

Abstract

The retirement behavior of Pennsylvania public school teachers in 1997–98 and 1998–99, a period when state early retirement incentives were temporarily increased, is modeled using a choice framework that emphasizes both pecuniary and nonpecuniary factors of the retirement decision under a defined benefit retirement plan. We find each to have large and statistically significant effects on the decision to retire. The present value of inflation-adjusted pension benefits of a public defined benefit plan is found to be an important and sizable determinant of retirement. A $1,000 (or .4 percent) increase in the real present value of pension benefits is estimated to increase the probability of retirement for female teachers by .02 to .08 percentage points; this implies an elasticity of retirement for female teachers with respect to the present value of real pensions of between 2.0 to 3.5. These estimated defined benefit pension elasticities for female teachers are higher than for male teachers, whose comparable retirement elasticity was 1.9 to 2.5. A $1,000 increase in current salary is found to reduce the mean probability of retirement by .1 percentage points, implying an elasticity of -1.4. Thus, substantial salary increases systematically reduce the probability of older teachers retiring. © 2006 American Education Finance Association

Suggested Citation

  • Joshua Furgeson & Robert P. Strauss & William B. Vogt, 2006. "The Effects of Defined Benefit Pension Incentives and Working Conditions on Teacher Retirement Decisions," Education Finance and Policy, MIT Press, vol. 1(3), pages 316-348, June.
    • Handle: RePEc:tpr:edfpol:v:1:y:2006:i:3:p:316-348
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/edfp.2006.1.3.316
    Download Restriction: Access to PDF is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Patten Priestley Mahler, 2017. "Are Teacher Pensions "Hazardous" for Schools?," Upjohn Working Papers 18-281, W.E. Upjohn Institute for Employment Research.
    2. Papke, Leslie E., 2019. "Retirement choices by state and local public sector employees: the role of eligibility and financial incentives," Journal of Pension Economics and Finance, Cambridge University Press, vol. 18(4), pages 515-528, October.
    3. Dongwoo Kim & Cory Koedel & Wei Kong & Shawn Ni & Michael Podgursky & Weiwei Wu, 2021. "Pensions and Late-Career Teacher Retention," Education Finance and Policy, MIT Press, vol. 16(1), pages 42-65, Winter.
    4. Shawn Ni & Michael Podgursky, 2016. "How Teachers Respond to Pension System Incentives: New Estimates and Policy Applications," Journal of Labor Economics, University of Chicago Press, vol. 34(4), pages 1075-1104.
    5. Figlio, D. & Karbownik, K. & Salvanes, K.G., 2016. "Education Research and Administrative Data," Handbook of the Economics of Education,, Elsevier.
    6. Maria D. Fitzpatrick & Michael F. Lovenheim, 2014. "Early Retirement Incentives and Student Achievement," American Economic Journal: Economic Policy, American Economic Association, vol. 6(3), pages 120-154, August.
    7. Morrill, Melinda Sandler & Westall, John, 2019. "Social security and retirement timing: evidence from a national sample of teachers," Journal of Pension Economics and Finance, Cambridge University Press, vol. 18(4), pages 549-564, October.
    8. Ni, Shawn & Podgursky, Michael & Wang, Xiqian, 2022. "Teacher pension enhancements and staffing in an urban school district," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(4), pages 613-633, October.
    9. Gruber, Jonathan & Kanninen, Ohto & Ravaska, Terhi, 2022. "Relabeling, retirement and regret," Journal of Public Economics, Elsevier, vol. 211(C).
    10. Ashok Thomas & Luca Spataro, 2016. "The Effects Of Pension Funds On Markets Performance: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 1-33, February.
    11. Ashok Thomas & Luca Spataro, 2013. "Pension funds and Market Efficiency: A review," Discussion Papers 2013/164, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    12. Brown, Kristine M., 2013. "The link between pensions and retirement timing: Lessons from California teachers," Journal of Public Economics, Elsevier, vol. 98(C), pages 1-14.
    13. Martin F. Lueken & Michael Podgursky, 2016. "Determinants of Cashing Out: A Behavioral Analysis of Refund Claimants and Annuitants in the Illinois Teachers Retirement System," Working Papers 1605, Department of Economics, University of Missouri.
    14. Baron, E. Jason, 2018. "The Effect of Teachers’ Unions on Student Achievement in the Short Run: Evidence from Wisconsin’s Act 10," Economics of Education Review, Elsevier, vol. 67(C), pages 40-57.
    15. Ohto Kanninen & Terhi Ravaska & Jon Gruber & Satu Nivalainen & Roope Uusitalo, 2019. "The Effect of Relabeling and Incentives on Retirement: Evidence from the Finnish Pension Reform in 2005," Working Papers 328, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    16. Kim, Dongwoo, 2020. "Worker retirement responses to pension incentives: Do they respond to pension wealth?," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 365-385.

    More about this item

    Keywords

    teacher pensions; teacher retirement; teacher benefits;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:edfpol:v:1:y:2006:i:3:p:316-348. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.