When They're Sixty-Four: Peer Effects and the Timing of Retirement

Kristine Brown, Ron Laschever

NBER Retirement Research Center Paper No. NB 09-17
Issued in September 2009

This paper examines the effect of peers on an individual's likelihood of retirement using data from the Los Angeles Uni ed School District. We show that two large pension reforms differentially impacted the financial incentives for retirement within and across schools. Using an administrative dataset of the full population of district teachers ages 55 and over, covering the years 1997-2001 (n=31,931), we construct school-level peer groups and calculate the impact of the reforms on pension nancial incentives. We use a measure of the unexpected (reform-induced) change in the pension wealth of teachers in a school as an instrument for retirements at that school. After controlling for individual and school characteristics, and including individual xed effects, our IV estimates of the effect of colleagues' retirement on a teacher's own likelihood of retirement are sizable and statistically signi cant. For example, we nd that the retirement of an additional teacher in the previous year at the same school increases a teacher's own likelihood of retirement by an additional 1.8 percentage points.

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