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Regional Educational Laboratory - Southwest

This presentation discusses the incentive structure and pension wealth accrual in Arkansas, using data to analyze labor market response. It covers raw tabulations, econometric analyses, policy simulations, and research questions.

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Regional Educational Laboratory - Southwest

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  1. Using Pension Data: the case of Arkansas Presented by: Robert M. Costrell University of Arkansas June 8, 2009 Institute for Education Sciences Washington, DC. Edvance Research, Inc. Regional Educational Laboratory - Southwest

  2. Outline • Incentive Structure • Pension Wealth Accrual • Data to Analyze Labor Market Response • Dept of Education & Teacher Retirement System • Raw Tabulations • Econometric Analyses • Policy Simulations • Research Questions (presentation based on joint work with Mike Podgursky, Josh McGee) Edvance Research, Inc.

  3. Incentive Structure • Pension formulas embed strong incentives • A “pull” to work until reaching pension spike • A “push” to retire shortly thereafter • Incentives embedded in wealth accrual • Net present value of discounted benefits • Annual accrual is deferred income from additional year of work • Can be calculated from benefit formulas • Eligibility rules for normal & early retirement Edvance Research, Inc.

  4. Annual Accrual in Arkansas The “pull” to the spike The “push”: negative accrual (without T-DROP) Edvance Research, Inc.

  5. Data Sets • ADE Teacher Longitudinal Files • Can be used to track separations • Teacher characteristics • ATRS Pension File Snapshot • Active, inactive, retired • Years of service, DOB, final average salary • Other pension characteristics, esp. DROP • ADE-ATRS cooperation in linking files • Identifier replaced to preserve confidentiality Edvance Research, Inc.

  6. Raw Data on Retirements Edvance Research, Inc.

  7. Econometric Analyses • CA: Brown (2006, 2009) • PA: Ferguson, Strauss, Vogt (2006) • MO: Podgursky, et. al (2009) • AR: Costrell & McGee (2009) See NCPI Conference papers. www.performanceincentives.org/conference/papers2009.asp • Other states at earlier stage of data acquisition Edvance Research, Inc.

  8. AR Estimation: Linked Data Predicted Separation Probabilities-ATRS Accrual 25-year old entrant Edvance Research, Inc.

  9. AR Policy Simulation (preliminary) Predicted Separation Probabilities-Constant Accrual Edvance Research, Inc. 25-year old entrant

  10. Research Questions • Differential Labor Market Responses • By demographics (e.g. urban/rural; M/F) • By teaching field (HS/elem; science/math) • Policy Simulations • Changes in pension parameters • Changes in pension regime (e.g. cash balance) • Fiscal Analyses • Transition costs for policy changes Edvance Research, Inc.

  11. REL Southwest Forum Educator Staffing, Quality, and Teacher Retirement Benefit Systems Wednesday, July 29, 2009 Omni Dallas Hotel at Park West Dallas, Texas To learn more contact: Kimberly Bruster kbruster@edvanceresearch.com or 210-558-4133 Edvance Research, Inc.

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