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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 some play a 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8658.

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Date of creation: Dec 2001
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Publication status: published as Baker, Michael, Jonathan Gruber and Kevin Milligan. "The Retirement Incentive Effects Of Canada's Income Security Programs," Canadian Journal of Economics, 2003, v36(2,May), 261-290.
Handle: RePEc:nbr:nberwo:8658

Note: AG LS PE
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  1. 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.
  2. Michael Baker, 2002. "The Retirement Behavior of Married Couples: Evidence from the Spouse's Allowance," Journal of Human Resources, University of Wisconsin Press, vol. 37(1), pages 1-34.
  3. Jonathan Gruber, 1997. "Social Security and Retirement in Canada," NBER Working Papers 6308, 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, vol. 87(2), pages 239-269, September.
  5. Janice Compton, . "Determinants of Retirement: Does Money Really matter?," Working Papers-Department of Finance Canada 2001-02, Department of Finance Canada.
  6. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. Jonathan Gruber, 1996. "Disability Insurance Benefits and Labor Supply," NBER Working Papers 5866, 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. Sewin Chan & Ann Huff Stevens, 2001. "Retirement Incentives and Expectations," NBER Working Papers 8082, National Bureau of Economic Research, Inc.
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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 427, McMaster University.
  2. 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.
  3. John J. Heim, 2009. "A MethodFor Separating Iincome & Substitution Effects Of Exchange Rate Changes On Aggregate Demand," Rensselaer Working Papers in Economics 0901, Rensselaer Polytechnic Institute, Department of Economics.
  4. 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," Social and Economic Dimensions of an Aging Population Research Papers 134, McMaster University.
  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.
  6. Michael R. Veall, 2006. "The Top Shares of Older Earners in Canada," Quantitative Studies in Economics and Population Research Reports 408, McMaster University.
  7. 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.
  8. 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.
  9. Pierre Lefebvre & Philip Merrigan & Pierre-Carl Michaud, 2011. "The Recent Evolution of Retirement Patterns in Canada," Cahiers de recherche 1126, CIRPEE.
  10. 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 263, McMaster University.
  11. 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.
  12. 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.
  13. Bernardo Lanza Queiroz, 2007. "The determinants of male retirement in urban Brazil," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 17(1), pages 11-36, January-A.
  14. 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.
  15. 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.

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