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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.

Suggested Citation

  • Michael Baker & Jonathan Gruber & Kevin Milligan, 2001. "The Retirement Incentive Effects of Canada's Income Security Programs," NBER Working Papers 8658, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8658
    Note: AG LS PE
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    References listed on IDEAS

    as
    1. 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.
    2. Jonathan Gruber, 2000. "Disability Insurance Benefits and Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1162-1183, December.
    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.
    4. 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 244-264, May.
    5. Janice Compton, "undated". "Determinants of Retirement: Does Money Really matter?," Working Papers-Department of Finance Canada 2001-02, Department of Finance Canada.
    6. 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 724-756, October.
    7. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    8. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    9. 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.
    10. Sewin Chan & Ann Huff Stevens, 2001. "Retirement Incentives and Expectations," NBER Working Papers 8082, National Bureau of Economic Research, Inc.
    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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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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