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

NBER Working Paper No. 20582

Issued in October 2014

NBER Program(s):Economics of Aging, Economics of Education, Labor Studies, Public Economics



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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w20582

Published: Maria Donovan Fitzpatrick, 2015. "How Much Are Public School Teachers Willing to Pay for Their Retirement Benefits?," American Economic Journal: Economic Policy, American Economic Association, vol. 7(4), pages 165-88, November. citation courtesy of

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