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

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  • Maria Donovan Fitzpatrick

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)

Suggested Citation

  • 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 165-188, November.
    • Handle: RePEc:aea:aejpol:v:7:y:2015:i:4:p:165-88
    Note: DOI: 10.1257/pol.20140087
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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