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  4. November 2015
  5. How Much Are Public School Teachers Willing to Pay for Their Retirement Benefits?

How Much Are Public School Teachers Willing to Pay for Their Retirement Benefits?

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Abstract

Public sector employees receive large fractions of their lifetime income in the form of deferred compensation. The introduction of the opportunity provided to Illinois public school employees to purchase additional pension benefits allows me to estimate employees' willingness-to-pay for benefits relative to the cost of providing them. The results show employees are willing to pay 20 cents on average for a dollar increase in the present value of expected retirement benefits. The findings suggest substantial inefficiency in compensation and cast doubt on the ability of deferred compensation schemes to attract employees. (JEL H75, I21, J26, J45)

Citation

Fitzpatrick, Maria Donovan. 2015. "How Much Are Public School Teachers Willing to Pay for Their Retirement Benefits?" American Economic Journal: Economic Policy, 7 (4): 165-88. DOI: 10.1257/pol.20140087

Additional Materials

JEL Classification

  • H75 State and Local Government: Health; Education; Welfare; Public Pensions
  • I21 Analysis of Education
  • J26 Retirement; Retirement Policies
  • J45 Public Sector Labor Markets
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