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The effects of financial incentives and disincentives on teachers' retirement decisions: Evidence from the 2003 French pension

Author

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  • Fougère, Denis
  • Gouëdard, Pierre
Abstract
Using a sample of 12,463 high-school teachers, we evaluate the impact of the 2003 reform of the French national pension scheme. Considering the progressive implementation of the reform, we cannot use a reduced-form approach. Consequently, we estimate an option value model à la Stock and Wise (Econometrica, 1990). Structural estimates suggest that teachers are slightly risk averse, that their quarterly discount factor is close to unity and that their preference for leisure is comparable to the one found by Stock and Wise (1990). Simulations imply that teachers respond significantly to monetary incentives offered to those who continue working after the legal retirement age. Our partial effectiveness analysis shows that the reform has progressively increased the average retirement age up to 61. This shift in the retirement age distribution should have resulted in year 2010 in a 6.37% decrease of public spending associated with high-school teachers' pensions (except income taxes and other types of expenses, such as those relating to health, social security and widowhood).

Suggested Citation

  • Fougère, Denis & Gouëdard, Pierre, 2021. "The effects of financial incentives and disincentives on teachers' retirement decisions: Evidence from the 2003 French pension," CEPR Discussion Papers 16673, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16673
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    More about this item

    Keywords

    Option value model; Pension reform; Structural evaluation;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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