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The Retirement Incentive Effects of Canada's Income Security Programs

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Author Info
Michael Baker
Jonathan Gruber
Kevin Milligan

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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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Publisher 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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Related research
Keywords: retirement; income security;

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Janice Compton, . "Determinants of Retirement: Does Money Really matter?," Working Papers-Department of Finance Canada 2001-02, Department of Finance Canada. [Downloadable!]
  2. 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, vol. 17(4), pages 724-56, October. [Downloadable!] (restricted)
  3. 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. [Downloadable!]
    Other versions:
  4. Sewin Chan & Ann Huff Stevens, 2001. "Retirement Incentives and Expectations," NBER Working Papers 8082, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-80, September. [Downloadable!] (restricted)
    Other versions:
  7. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Jonathan Gruber, 1996. "Disability Insurance Benefits and Labor Supply," NBER Working Papers 5866, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Hausman, J. A. & Abrevaya, Jason & Scott-Morton, F. M., 1998. "Misclassification of the dependent variable in a discrete-response setting," Journal of Econometrics, Elsevier, vol. 87(2), pages 239-269, September. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  11. Michael Baker, . "The Retirement Behavior of Married Couples: Evidence From The Spouse’s Allowance," Department of Economics 99-03, California Davis - Department of Economics. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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 427, McMaster University. [Downloadable!]
  2. Au, Doreen & Crossley, Thomas F. & Schellhorn, Martin, 2004. "The Effect of Health Changes and Long-Term Health on the Work Activity of Older Canadians," IZA Discussion Papers 1281, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Frank T. Denton & Byron G. Spencer, 2008. "What is Retirement? A Review and Assessment of Alternative Concepts and Measures," Social and Economic Dimensions of an Aging Population Research Papers 231, McMaster University. [Downloadable!]
  4. 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. [Downloadable!]
  5. 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, vol. 6, pages 38-46, Spring. [Downloadable!]
  6. 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. [Downloadable!] (restricted)
  7. Michael R. Veall, 2006. "The Top Shares of Older Earners in Canada," Quantitative Studies in Economics and Population Research Reports 408, McMaster University. [Downloadable!]
    Other versions:
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