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The Retirement Incentive Effects of Canada's Income Security Programs

  • Michael Baker
  • Jonathan Gruber
  • Kevin Milligan

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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File URL: http://www.nber.org/papers/w8658.pdf
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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. 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.
  2. Sewin Chan & Ann Huff Stevens, 2001. "Retirement Incentives and Expectations," NBER Working Papers 8082, National Bureau of Economic Research, Inc.
  3. Michael Baker, . "The Retirement Behavior of Married Couples: Evidence From The Spouse’s Allowance," Department of Economics 99-03, California Davis - Department of Economics.
  4. Janice Compton, . "Determinants of Retirement: Does Money Really matter?," Working Papers-Department of Finance Canada 2001-02, Department of Finance Canada.
  5. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
  6. Jonathan Gruber, 1996. "Disability Insurance Benefits and Labor Supply," NBER Working Papers 5866, National Bureau of Economic Research, Inc.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
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