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Pension Reform and Labor Supply
By Andrew C. Johnston & Jonah Rockoff
As unfunded pension liabilities mount, governments experiment with ways to curb the costs of pensions. We examine the effect of one such reform on the retention and productivity of public-sector workers. The reform reduced pension annuities and increased penalties for early retirement, projected to save 8 percent of revenues. We use the fact that the reform only applied to workers below age and experience cutoffs to estimate the effect of the reform. We can rule out even small attrition effects and find the reform had no effect on worker output. The reform maintained the extensive and intensive margins of labor supply.
Source: SSRN
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