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Andrew C. Johnston
Do Pensions Enhance Worker Effort and Selection? Evidence from Public Schools
Why do employers offer pensions? We empirically examine two theoretical rationales, namely that pensions improve worker effort and worker selection. We test these hypotheses using rich administrative measures on effort and output for teachers around the pension-eligibility notch. When workers cross the notch, their effective compensation falls by roughly 50 percent of salary, but we observe no reduction in worker effort or output. This implies that pension payments do not increase effort. As for selection, we find that pensions retain low-value-added and high-value-added workers at the same rate, implying similar preferences across teacher quality and no influence on selection.
Teacher Labor Market Equilibrium and Student Achievement
We study whether reallocating existing teachers across schools within a district can increase student achievement, and what policies would help achieve these gains. Using a model of multi-dimensional value-added, we find meaningful achievement gains from reallocating teachers within a district. Using an estimated equilibrium model of the teacher labor market, we find that achieving most of these gains requires directly affecting teachers' preferences over schools. In contrast, directly affecting principals' selection of teachers can lower student achievement. Our analysis highlights the importance of equilibrium and second-best reasoning in analyzing teacher labor market policies.
Pension Reform and Labor Supply: Retention and Productivity under a Pension Cut
We examine the effect of a representative pension reform on the retention and productivity of public-school teachers. The reform reduced pension annuities and increased penalties for early retirement---projected to save eight percent of revenues. We leverage detailed administrative records and a discontinuity in the reform to estimate its effect. The reform increased worker retention by 3 percent, discouraging early retirement. Using idiosyncratic within-school variation in reform exposure, we find the reform increased student achievement by 0.03 student standard deviations, mediated by retention and effort. Thus, the reform maintained or improved both the extensive and intensive margins of labor supply.
Preferences, Selection, and the Structure of Teacher Pay
Human-capital formation in school depends largely on the selection and retention of teachers. I conduct a discrete-choice experiment with responses linked to administrative teacher and student records to examine teacher preferences for compensation structure and working conditions. I calculate willingness-to-pay for a rich set of work attributes. High-performing teachers have similar preferences to other teachers, but they have stronger preferences for performance pay. Taking the preference estimates at face value I explore how schools should structure compensation to meet various objectives. Under each objective, schools appear to underpay in salary and performance pay while overpaying in retirement. Restructuring compensation can increase both teacher welfare and student achievement.