How does pension generosity affect labor?

Working Paper

I exploit a policy change on U.S. federal workers’ pension benefits to estimate the effect of pension generosity on worker retirement, retention and recruitment. The policy increased pensions by 16%-25% or approximately $111,000. The findings indicate that pension generosity decreases labor supply for the oldest workers, but increases labor supply for low wage workers. Additionally, there is a 30% decrease in job quits for permanent workers. Last, there is little evidence that pension generosity has an effect on new hires. Altogether, this shows that pensions are effective in retaining workers and have important implications for workforce planning.

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