The Retirement Incentive Effects of Canada's Income Security Programs

47 Pages Posted: 14 Dec 2001 Last revised: 29 Aug 2022

See all articles by Michael Baker

Michael Baker

University of Toronto - Department of Economics; National Bureau of Economic Research (NBER)

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Kevin S. Milligan

University of British Columbia (UBC) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2001

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

Baker, Michael and Gruber, Jonathan and Milligan, Kevin S., The Retirement Incentive Effects of Canada's Income Security Programs (December 2001). NBER Working Paper No. w8658, Available at SSRN: https://ssrn.com/abstract=294096

Michael Baker (Contact Author)

University of Toronto - Department of Economics ( email )

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Jonathan Gruber

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Kevin S. Milligan

University of British Columbia (UBC) - Department of Economics ( email )

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Canada

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United States

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