Working Paper: NBER ID: w8658
Authors: 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.
Keywords: income security programs; retirement incentives; Canada
JEL Codes: H3; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Income security benefits (H55) | Retirement age decisions (J26) |
| Lifetime earnings (J17) | Retirement decisions (J26) |
| Income security system (H55) | Overestimation of effects on retirement decisions (J26) |
| Program reform (C88) | Responses to fiscal crises (H12) |
| Controlling for lifetime earnings (J31) | Avoiding overestimation of IS system effects (C51) |