As unfunded pension liabilities grow, governments experiment with ways to curb costs. We examine the effect of a representative cost-cutting reform on the retention and productivity of workers. The reform reduced pension annuities and increased penalties for early retirement, projected to save 8 percent of revenues. We leverage administrative records and a discontinuity in the reform to estimate its effect on labor supply. The reform slightly increased worker retention, and we can rule out small attrition effects. The reform had no effect on worker output. The extensive and intensive margins of labor supply appear to be maintained under the reform.
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.