Inferring Workers\u27 Preferences for Salaries and Pensions: Evidence from Teachers

Teachers are the most important educational input, and retaining talented teachers is a key policy objective. While the public debate has focused on the role of salaries, in most US states teachers receive a large share of their lifetime compensation in the form of defined-benefits retirement pensions. In spite of their large budgets, we know very little about the effects of these programs on teachers’ retention. This project studies this question leveraging on a major reform of public-sector employment: In 2011 Wisconsin dramatically changed the way teachers are paid and contribute to the pension fund. Using variation in salaries and benefits across age, seniority, and districts, I will estimate the effect of changes in pay and pensions on the retirement behavior of workers with different quality. I will use a theoretical model to generate testable predictions and identify key policy parameters, and a combination of reduced-form and structural methods to estimate the parameters