The Link Between Pensions and Retirement Timing: Lessons from California Teachers

• Activity Number: 579
• Type: Topic Contributed
• Date/Time: Wednesday, August 4, 2010 : 2:00 PM to 3:50 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Kristine Brown*+
• Companies: University of Illinois at Urbana-Champaign
• Keywords: Retirement ; Pension ; Teachers

Abstract

I exploit a major, unanticipated reform of the California teachers' pension to provide quasi-experimental evidence on the link between pension generosity and retirement timing. Using two large administrative datasets, I conduct a reduced-form analysis of the pension reform and estimate a structural model of retirement timing. With both methods, I find that the rise in the price of retirement had a positive, but relatively small effect on the fraction of people retiring later. The implied estimates of the elasticity of retirement age with respect to the price of retirement are 0.02 in the medium-run and 0.10 in the long-run.