Simulating the Response to Reform of Canada's Income Security Programs
AbstractWe explore the fiscal implications of reforms to the Canadian retirement income system by decomposing the fiscal effect of reforms into two components. The mechanical effect captures the change in the government's budget assuming no behavioral response to the reform. The second component is the fiscal implication of the behavioral effect, which captures the influence of any induced changes in elderly labor supply on government budgets. We find that the behavioral response can account for up to half of the total impact of reform on government budgets. The behavioral response affects government budgets not only in the retirement income system but also through increased income, payroll, and consumption tax revenue on any induced labor market earnings among the elderly. We show that fully accounting for the behavioral response to reforms can change the cost estimates and distributive impact of retirement income reforms.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9455.
Date of creation: Jan 2003
Date of revision:
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.
Note: AG LS PE
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Find related papers by JEL classification:
- H0 - Public Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-31 (All new papers)
- NEP-CMP-2004-07-18 (Computational Economics)
- NEP-IAS-2003-01-27 (Insurance Economics)
- NEP-PBE-2004-08-31 (Public Economics)
- NEP-REG-2004-08-31 (Regulation)
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