A Structural Econometric Approach to Analyzing the Impact of Teacher Pension Reform

The growing fiscal cost of K-12 teacher pension plans and pension-induced labor market distortions have led to calls for teacher pension reforms. Dynamic structural econometric models are a useful way to analyze the fiscal and staffing consequences of current and alternative retirement plans. This paper lays out the benefits of the structural econometric modeling approach for analyzing changes to teacher pension plans, and estimates such a model for Missouri public school teachers. The results are then used to simulate effects of a pension reform on teacher retirement and employer pension costs.