The Retirement Incentive Effects of Canada's Income Security Programs

Michael Baker, Jonathan Gruber, Kevin Milligan

NBER Working Paper No. 8658
Issued in December 2001
NBER Program(s):Program on the Economics of Aging, Labor Studies Program, Public Economics Program

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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Document Object Identifier (DOI): 10.3386/w8658

Published: 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. citation courtesy of

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