Working papers
The Long-Run Impact of Early Retirement Programs: Evidence from Canadian Pension Reforms
with Stefan Staubli
Raising the early eligibility age (EEA) for old age pensions is a popular policy to reduce financial pressure on pension systems. While a mature literature has investigated the short-run impact of the EEA on labor supply, evidence on the long-run impacts on economic well-being and poverty is scarce, even though the impact on later-life living standards is crucial to determine the EEA’s welfare effect. This paper helps to fill this gap by studying two Canadian pension reforms that reduced the EEA from age 65 to age 60. The reforms took place in the 1980s, enabling us to follow affected individuals for the entire retirement period until they die.
Using comprehensive tax records and a variety of research designs, we obtain three main findings. First, a one-year reduction in the EEA lowered the pension claiming age by 0.25 years but had no effect on the labor market exit age. Second, early claiming increased pension and total income early in retirement but these gains were overshadowed by income losses later in retirement. Third, lowering the EEA had important distributional consequences: the losses in lifetime pension and total income were concentrated among retirees with above-median income, while low-income retirees experienced a significant improvement in later-life economic well-being. Overall, the EEA reduction in the 1980s were associated with a significant decline in elderly bankruptcy and poverty rates in Canada.
The Long-Run Impact of Early Retirement Programs: Evidence from Canadian Pension Reforms
with Stefan Staubli
Raising the early eligibility age (EEA) for old age pensions is a popular policy to reduce financial pressure on pension systems. While a mature literature has investigated the short-run impact of the EEA on labor supply, evidence on the long-run impacts on economic well-being and poverty is scarce, even though the impact on later-life living standards is crucial to determine the EEA’s welfare effect. This paper helps to fill this gap by studying two Canadian pension reforms that reduced the EEA from age 65 to age 60. The reforms took place in the 1980s, enabling us to follow affected individuals for the entire retirement period until they die.
Using comprehensive tax records and a variety of research designs, we obtain three main findings. First, a one-year reduction in the EEA lowered the pension claiming age by 0.25 years but had no effect on the labor market exit age. Second, early claiming increased pension and total income early in retirement but these gains were overshadowed by income losses later in retirement. Third, lowering the EEA had important distributional consequences: the losses in lifetime pension and total income were concentrated among retirees with above-median income, while low-income retirees experienced a significant improvement in later-life economic well-being. Overall, the EEA reduction in the 1980s were associated with a significant decline in elderly bankruptcy and poverty rates in Canada.
Design Matters: Causal Evidence on Cash Benefits and Fertility
Children-related benefit is a common policy tool in many countries to reduce the costs of having children and raise fertility. Yet, how the design of benefits affects fertility responses remains less studied. This paper helps to fill this gap by leveraging the introduction of two benefits — a universal benefit and an earnings-related benefit — in the Canadian province of Quebec. Using Canadian administrative tax data and exploiting the variation of benefits across regions and time, I follow a difference-in-differences approach to uncover the fertility responses to the two benefits. The empirical analysis delivers two key results. First, a C$1,000 (2017 prices) spent on universal benefits raises fertility by 3.6% while the same amount spent on earnings-related benefits raises fertility by 2%. Importantly, the increase in fertility reflects an increase in the ultimate number of children rather than a re-timing of having children. Second, the large discrepancy in fertility responses is driven by the distributional feature of the two benefits. While universal benefits make larger payments to low-earnings women who are more responsive to financial incentives, the earnings-related benefits make larger payments to high earnings women who are less responsive.
The Impact of Paid family Leave on Mothers’ Employment: Evidence from Canadian Tax Data
This paper investigates the impact of an expansion in family leave benefits in Canada on mothers’ labor market outcomes after childbirth. I use a regression discontinuity design combined with difference-in-difference design (RD-DD) that compares labor market outcomes of mothers who give birth shortly before and shortly after the date when the policy was in effect. I find that while the extension of cash benefits reduces mothers’ earnings in the short run, the medium- and long-run effects are small and insignificant. Despite the null effects on earnings in the medium- and long-run, a quantile regression analysis suggests that the effects of the family leave expansion are positive in the lower and middle parts of the earnings distribution, and negative in the upper-most part. Taken together, my findings might have important implications for the policy debate over parental leave programs, suggesting that the benefits might have negative impact on the middle and upper-class women.
This paper investigates the impact of an expansion in family leave benefits in Canada on mothers’ labor market outcomes after childbirth. I use a regression discontinuity design combined with difference-in-difference design (RD-DD) that compares labor market outcomes of mothers who give birth shortly before and shortly after the date when the policy was in effect. I find that while the extension of cash benefits reduces mothers’ earnings in the short run, the medium- and long-run effects are small and insignificant. Despite the null effects on earnings in the medium- and long-run, a quantile regression analysis suggests that the effects of the family leave expansion are positive in the lower and middle parts of the earnings distribution, and negative in the upper-most part. Taken together, my findings might have important implications for the policy debate over parental leave programs, suggesting that the benefits might have negative impact on the middle and upper-class women.
