Pension incentives, mandatory retirement and retirement behavior in higher education

Abstract

Incentives to retire at 26 high quality private colleges and universities are analysed. These incentives are then embedded in a structural retirement model, which is estimated using data for tenured, male faculty employed at these institutions in the 1970s. Simulations suggest that raising or abolishing the mandatory retirement age will substantially delay retirement by faculty members at these institutions. Early retirement incentive programs would appear to be unlikely to offset the increase in work due to changes in mandatory retirement. Moreover, rents created by these programs exceed savings from induced early retirements, with salaries of replacements further adding to costs.