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The Retirement Incentive Effects of Canada's Income Security Programs

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  • Michael Baker
  • Jonathan Gruber
  • Kevin Milligan

Abstract

Like most other developed nations, Canada has a large income security system for retirement that provides significant and widely varying disincentives to work at older ages. Empirical investigation of their effects has been hindered by lack of appropriate data. We provide an empirical analysis of the retirement incentives of the Canadian Income Security (IS) system using a new and comprehensive administrative data base. We find that the work disincentives inherent in the Canadian IS system have large and statistically significant impacts on retirement. This suggests that program reform can play some role in responses to the fiscal crises these programs periodically experience. We also demonstrate the importance of controlling for lifetime earnings in retirement models. Specifications without these controls overestimate the effects of the IS system. Finally, our estimates vary in sensible ways across samples lending greater confidence to our estimates.

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Bibliographic Info

Paper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 65.

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Length: 54 pages
Date of creation: Nov 2001
Date of revision:
Handle: RePEc:mcm:sedapp:65

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Keywords: retirement; income security;

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References

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  1. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
  2. Michael Baker, . "The Retirement Behavior of Married Couples: Evidence From The Spouse’s Allowance," Department of Economics 99-03, California Davis - Department of Economics.
  3. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
  4. Hausman, J. A. & Abrevaya, Jason & Scott-Morton, F. M., 1998. "Misclassification of the dependent variable in a discrete-response setting," Journal of Econometrics, Elsevier, Elsevier, vol. 87(2), pages 239-269, September.
  5. Jonathan Gruber, 1999. "Social Security and Retirement in Canada," NBER Chapters, in: Social Security and Retirement around the World, pages 73-99 National Bureau of Economic Research, Inc.
  6. Janice Compton, . "Determinants of Retirement: Does Money Really matter?," Working Papers-Department of Finance Canada, Department of Finance Canada 2001-02, Department of Finance Canada.
  7. Sewin Chan & Ann Huff Stevens, 2001. "Retirement Incentives and Expectations," NBER Working Papers 8082, National Bureau of Economic Research, Inc.
  8. Baker, Michael & Benjamin, Dwayne, 1999. "Early Retirement Provisions and the Labor Force Behavior of Older Men: Evidence from Canada," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(4), pages 724-56, October.
  9. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  10. Baker, Michael & Benjamin, Dwayne, 1999. "How do retirement tests affect the labour supply of older men?," Journal of Public Economics, Elsevier, vol. 71(1), pages 27-51, January.
  11. James E. Pesando & Morley Gunderson, 1988. "Retirement Incentives Contained in Occupational Pension Plans and Their Implications for the Mandatory Retirement Debate," Canadian Journal of Economics, Canadian Economics Association, vol. 21(2), pages 244-64, May.
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Cited by:
  1. Frank T. Denton & Byron G. Spencer, 2008. "What Is Retirement? A Review and Assessment of Alternative Concepts and Measures," Quantitative Studies in Economics and Population Research Reports, McMaster University 427, McMaster University.
  2. Bernardo Lanza Queiroz, 2007. "The determinants of male retirement in urban Brazil," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 17(1), pages 11-36, January-A.
  3. Ross Finnie & David Gray & Yan Zhang, 2013. "Guaranteed Income Supplement (GIS) Status Amongst the Retired Population: An Analysis of the Incidence," Canadian Public Policy, University of Toronto Press, vol. 39(s1), pages 65-80, May.
  4. Latif, Ehsan, 2011. "The impact of retirement on psychological well-being in Canada," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 373-380, August.
  5. Pierre Lefebvre & Philip Merrigan & Pierre-Carl Michaud, 2011. "The Recent Evolution of Retirement Patterns in Canada," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 287, McMaster University.
  6. Michael R. Veall, 2006. "The Top Shares of Older Earners in Canada," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 156, McMaster University.
  7. Asch, Beth & Haider, Steven J. & Zissimopoulos, Julie, 2005. "Financial incentives and retirement: evidence from federal civil service workers," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 427-440, February.
  8. Martin Hering & Thomas R. Klassen, 2010. "Strengthening Fairness and Funding in the Canada Pension Plan: Is Raising the Retirement Age an Option?," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 263, McMaster University.
  9. Susan A. McDaniel, 2003. "Toward Disentangling Policy Implications of Economic and Demographic Changes in Canada's Aging Population," Canadian Public Policy, University of Toronto Press, vol. 29(4), pages 491-509, December.
  10. John J. Heim, 2009. "A MethodFor Separating Iincome & Substitution Effects Of Exchange Rate Changes On Aggregate Demand," Rensselaer Working Papers in Economics, Rensselaer Polytechnic Institute, Department of Economics 0901, Rensselaer Polytechnic Institute, Department of Economics.
  11. Doreen Wing Han Au & Thomas F. Crossley & Martin Schellhorn, 2005. "The Effect of Health Changes and Long-term Health on the Work Activity of Older Canadians," Quantitative Studies in Economics and Population Research Reports, McMaster University 397, McMaster University.
  12. Pierre Fortin, 2003. "Differences in Annual Work Hours per Capita between the United States and Canada," International Productivity Monitor, Centre for the Study of Living Standards, Centre for the Study of Living Standards, vol. 6, pages 38-46, Spring.
  13. Kevin Milligan & Tammy Schirle, 2008. "Improving the Labour Market Incentives of Canada's Public Pensions," Canadian Public Policy, University of Toronto Press, vol. 34(3), pages 281-304, September.
  14. Bernardo Lanza Queiroz & Moema Gonçalves Bueno Figoli, 2011. "Population aging and the rising costs of public pension in Brazil," Textos para Discussão Cedeplar-UFMG td438, Cedeplar, Universidade Federal de Minas Gerais.
  15. Jeff Borland, 2005. "Transitions to Retirement: A Review," Melbourne Institute Working Paper Series wp2005n03, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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