Simulating the Response to Reform of Canada's Income Security System Kevin Milligan ~ Vancouver School of Economics ~ University of British Columbia

Simulating the Response to Reform of Canada's Income Security System

with Michael Baker and Jonathan Gruber.
Google Scholar entry.

In David A. Wise and Jonathan Gruber (eds.) Social Security and Retirement Around the World: Fiscal Implications. Chicago: University of Chicago Press, 2007: Publisher Site Conference Site.


We explore the fiscal implications of reforms to the Canadian retirement income system by decomposing the fiscal effect of reforms into two components. The mechanical effect captures the change in the government's budget assuming no behavioral response to the reform. The second component is the fiscal implication of the behavioral effect, which captures the influence of any induced changes in elderly labor supply on government budgets. We find that the behavioral response can account for up to half of the total impact of reform on government budgets. The behavioral response affects government budgets not only in the retirement income system but also through increased income, payroll, and consumption tax revenue on any induced labor market earnings among the elderly. We show that fully accounting for the behavioral response to reforms can change the cost estimates and distributive impact of retirement income reforms.

NBER Working Paper No. 9455, January, 2003: Abstract/Paper.

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