Pension Reform and Labor Supply: Retention and Productivity under a Pension Cut
We examine the effect of a representative pension reform on the retention and productivity of workers. The reform cut pension annuities and early retirement benefits for public school teachers, projected to save eight percent of pension revenues. We leverage administrative records and a discontinuity in the reform to estimate its effect. Contrary to expectations, the cut increased retention by discouraging early retirement. Using idiosyncratic within-school variation in exposure, we find the reform somewhat increased student achievement by 0.01–0.03 standard deviations, partly through reduced turnover. The reform thus maintained or improved both teacher retention and productivity.
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