corporate liquidity in games of monopoly power cr oss sectional variation in corporate liquidity within a sample of large u s corporations suggests that there are material effects from product market competiti on the empirical evidence is consistent with an oligopolistic model wherein liquid assets are employed both to signal commitment to retaliate against market en croachment and to enable firms to rapidly preempt new opportunities as predicted firms with high valuation and spending on intangibles in certain strategic positions hold large stocks of liquid assets copyright 1987 by mit press

expectations and realizations of work after retirement this paper analyzes a puzzling aspect of retirement behavior known as unretirement nearly 50 percent of retirees follow a nontraditional retirement path that involves partial retirement or unretirement and at least 26 percent of retirees later unretire i explore two possible explanations 1 unretirement transitions result from failures in planning or financial shocks and 2 unretirement transitions are anticipated prior to retirement reflecting a more complex retirement process i show that unretirement was anticipated for the vast majority of those returning to work and is not a result of financial shocks poor planning or low wealth accumulation

the economic effects of unemployment insurance in canada an empirical analysis of ui disentitlement this article provides an overview of the canadian unemployment insurance ui program including its evolution salient features relative size and knowledge about its labor market impacts understanding of these impacts is limited and we conclude that an event study approach is a promising way to further this knowledge we examine the effects of the 1976 ui disentitlement of the elderly on their labor force behavior and find evidence of significant adverse selection effects interactions with the public pension system suggest that poverty among the elderly could be best addressed through changes in programs other than ui

from theory to practice canadian economists contributions to public finance we survey canadian economists contributions to the field of public finance from the mid 1980s to 2016 we highlight the development and extension of the models and tools of public economics and the empirical studies that have deepened our understanding of the efficiency and distributional issues over a wide range of public finance issues we also highlight contributions to the development of policies through commissioned reports and the important role that canadian institutions the canadian tax foundation the think tanks and the federal and provincial departments of finance have played in shaping tax and fiscal policies de la theorie a la pratique contributions des economistes canadiens a la finance publique on examine les contributions des economistes canadiens au domaine de la finance publique du milieu des annees 1980 a 2016 on souligne le developpement et l extension des modeles et des outils d economie publique et les etudes empiriques qui ont aide a approfondir notre comprehension des enjeux d efficacite et de distribution dans un vaste eventail de questions de finance publique on souligne aussi les contributions des rapports commandites au developpement de politiques publiques ainsi que le role important d institutions canadiennes l association canadienne d etudes fiscales les groupes d experts ainsi que les ministeres des finances du gouvernement federal et des gouvernements provinciaux dans le design des politiques fiscales

how do retirement tests affect the labour supply of older men abstract we analyze the sequential elimination of retirement earnings tests from canada s public pension plans our empirical framework potentially overcomes the obstacles encountered analyzing the tests within the context of a national social security system our results indicate that the removal of the tests were associated with relatively large shifts from part year full time to full year full time work we are unable to reconcile these results within the context of a traditional labour supply model instead they are consistent with a model which incorporates fixed costs of work or labour market rigidities which preclude continuous reductions in labour supply around retirement

the perceived budget constraint under social security evidence from reentry behavior if as is usually assumed older individuals face a continuous choice of work hours without fixed costs or take account of the actuarial adjustment of social security benefits postponed as a result of the earnings test the earnings limit should not affect their labor supply before age 65 we test and reject these assumptions by estimating the hazard function for labor market reentry after retirement using white men in the retirement history survey we find that the earnings limit does affect reentry and that older men behave myopically responding to current benefits rather than to social security wealth several policy implications follow

new evidence on earnings and benefit claims following changes in the retirement earnings test in 2000 abstract this paper examines the labor force activity and timing of benefit claims of workers aged 65 69 in response to the removal of the retirement earnings test in 2000 we use the 1 sample of longitudinal social security administrative data that covers the period from 4 years before to 4 years after the removal of the test using a reduced form quantile regression method we find that effects on earnings are limited to workers with earnings just around the test threshold and above as predicted by economic theory our estimated effects suggest that labor supply elasticities with respect to the net of tax rate are approximately 0 05 0 07 for working primary beneficiaries aged 65 69 whose earnings are between the median and the 80th percentile further results show that applications for social security benefits following the earnings test removal accelerated by 2 to 5 percentage points among individuals aged 65 69 and by 3 to 7 percentage points among those reaching age 65

the joint choice of retirement age and postretirement hours of work in this paper we develop and estimate the first complete and internally consistent model of the effect of social security on the labor supply of the aged we develop a simple life cycle model that captures the effect of social security on the joint choice of the date of retirement and hours of work immediately after retirement we show that in the presence of social security the budget constraint relating these choices is highly complex and nonlinear and we develop a maximum likelihood procedure for the model that yields consistent parameter estimates our procedure avoids the selectivity biases present in prior studies that have ignored the nonlinearity of the constraint or have examined only self selected subsamples that exclude nonretirees our results show that social security has a significant though relatively small effect on the age of retirement and postretirement hours of work and that the effect of social security grows with advancing age

retirement wages and labor supply of the elderly a model of labor force participation market wages and labor supply of annual hours and weeks of work is estimated for married males and unmarried females in a sample from the retirement history survey 1969 75 matched with social security earnings records emphasis is placed on the effects of variables associated with retirement and old age and on the estimation of net age profiles purged of biases associated with specific years and cohorts and with the other included variables the effects of most of the usual variables appear to be consistent with the theory and with other empirical findings for both sexes in addition age itself has a strong net autonomous effect on each of the dependent variables due to biological societal or institutional factors

did soviet elderly employment respond to financial incentives evidence from pension reforms abstract this study answers the open question of whether workers respond to financial incentives in a command economy to do this i evaluate pension reforms in soviet russia in 1964 and 1969 that allowed pensioners to receive a greater share of their pensions if they worked resulting in a progressive elimination of benefit reduction rates variation in group eligibility and variation in benefit reduction rates in eastern and western regions allow for the use of several difference in differences frameworks i collect and digitize novel data from the soviet archives on pensioner employment constructing the first database of the soviet old age labor market i find that soviet pensioners are responsive to financial incentives by 1969 after the benefit reduction rate fell from an average of 47 8 to 24 1 pensioner employment rates rose by 5 7 percentage points representing a 47 increase finally i provide illustrative estimates of the employment elasticity with respect to the average net of tax rate that range from 0 6 to 1 4

the labour supply effect of the abolition of the earnings rule for older workers in the united kingdom high effective tax rates on work at and around state pension age deter participation an example is the earnings test operating in several oecd countries the united states abolished its test for the 65 age group in 2000 the united kingdom offers a natural experiment of this reform as it abolished its test known as the earnings rule in 1989 we examine the effect of this change taking account of the opportunity to defer pension rights abolition of the rule raised working hours of older male workers by around 4 hours a week with a lesser impact on women s behaviour

labor market search and optimal retirement policy a popular and long standing view is that social security is a means for young unemployed people to purchase jobs from older workers can social security by encouraging retirement and hence creating job vacancies for the young improve the allocation of workers to jobs maybe according to a standard model of labor market search but public retirement programs currently pay the elderly substantially more than their jobs are worth an important effect is that retirement reduces the value of other vacant jobs our results imply that recent reforms aimed at reducing retirement incentives are likely to improve labor market efficiency i introduction the objective of this article is to formalize a popular argument about the economic rationale for social security and public pension programs in the united states and other countries we construct a model in which there can be significant frictions slowing the process of matching workers with firms and social security is a labor market policy designed to remove old workers from the labor market in this sense it can be said that social security is a means for young unemployed individuals to purchase jobs from older employed workers president franklin d roosevelt in particular in one of his fireside chats suggested that this would be an important goal for social security the program for social security now pending before the congress is a necessary part of the future unemployment policy of the government it proposes by means of old age pensions to help those who have reached the age of retirement to give up their jobs and thus give to the younger generation greater opportunities for work and to give all a feeling of security as they look toward their old age roosevelt 1938 134 35 this position on social security continues to receive some support at least enough to receive serious consideration in recent social security debates in recent discussion about the retirement earnings test in congress many agreed with the following perspective social security when it was created in 1935 sought to achieve two goals moving older workers out of the workforce to make way for younger workers and to partially replace lost income due to retirement testimony of honorable john j rhodes iii in social security retirement test 1991 these debates are not unique to the united states as is well known european countries have recently devoted much attention to youth unemployment as a result public pension programs have become more generous and increasingly used to encourage labor force withdrawal among older workers although public pension programs have been used in many countries as age targeted employment policies there has been little work aimed at understanding their implications for the market at the aggregate level in this article we begin to address whether policies aimed at discouraging work among the elderly and thereby creating job vacancies for the young can improve the allocation of workers to jobs in the labor market in particular the idea that continued employment by the old contributes to increased youth unemployment implies that the life cycle contributes to congestion problems in the labor market accordingly an important aspect of a modeling approach aimed at addressing these issues should be a setting in which unemployment is an equilibrium phenomenon and the labor market participation decisions of workers impose a negative externality on the pool of the unemployed we introduce a simple model of labor market search along the lines of mortensen 1982 and pissarides 2000 extended to include retirement decisions and show how the optimality of induced retirement depends on the model s parameter values some of which imply that the social value of retirement exceeds the private value while other parameter values imply that the private value exceeds the social value

cross country analysis of secular cash trends abstract this study documents a pronounced secular upward trend in cash holdings which is almost systemic across seven industrialized countries over 1991 2008 with france exhibiting a modest rise and japan a substantial decline however the driving forces underlying the cash pattern are not uniform across countries while the evolution in firm characteristics necessitated elevated cash balances the time varying firm attributes explain the cash trend only in canada france uk and the us the agency motive plays a role in the rise in cash balances in germany our analysis highlights that the functioning of the financial system is crucial to corporate cash policy as australia s cash pattern is driven by shallow private credit markets that curbed cash reserves earlier on and the decelerating cash trend in japan is ascribed to financial reforms while there is a degree of commonality in the determinants of cash policies we find some divergence in cash practices

zipf s law for cities an explanation zipf s law is a very tight constraint on the class of admissible models of local growth it says that for most countries the size distribution of cities strikingly fits a power law the number of cities with populations greater than s is proportional to 1 s suppose that at least in the upper tail all cities follow some proportional growth process this appears to be verified empirically this automatically leads their distribution to converge to zipf s law

disability policy and the labor market evidence from a natural experiment in canada 1998 2006 abstract this paper examines the effect of changes in two key parameters in disability policy a the earnings that disability insurance beneficiaries are allowed to earn without losing their disability benefits and b automatic reinstatement where beneficiaries can have benefits reinstated without re application and re testing for disability determination we examine the effects of these policy changes on the probability of employment for disability beneficiaries as well as the flows onto and off the disability rolls we obtain our estimates using a difference in difference strategy that exploits the unique structure of disability insurance arrangements in canada namely that there are two programs one that covers individuals in the province of quebec and one in the rest of canada our preferred estimates indicate that the introduction of the allowable earnings change increased the propensity of disability beneficiaries to work but we do not find that the earnings exemption had an effect on the flows on to or off the disability rolls in contrast we find that the introduction of the automatic reinstatement policy did not have an effect on any of the outcomes we examine

early retirement provisions and the labor force behavior of older men evidence from canada we examine the sequential introduction of early retirement provisions to canada s two public pension plans these reforms provide a unique opportunity to assess the effect of public pension plan parameters on labor supply behavior free of the biases that potentially affect the simple time series or cross section inference presented in many previous studies we find that the reforms led to an increase in pension receipt but had little immediate effect on labor market behavior this is due to the fact that men who initially took advantage of the early retirement provisions would otherwise have had limited labor market participation

early claiming of social security benefits and labor supply behavior of older americans the labor supply incentives provided by the early retirement rules of the united states social security old age benefits program are of growing importance as the normal retirement age nra increases to 67 and the labor force participation of older americans starts to increase these incentives allow individuals who claim benefits before the nra but continue to work or return to the labor force to increase their future rate of benefit pay by having benefits withheld since the adjustment of the benefit rate takes place only after the nra is reached benefits received before the nra can become actuarially unfair for those who continue to work after claiming consistent with these incentives estimates from bivariate models of the monthly labor force exit and claiming hazards using data from the health and retirement study indicate that early claimers who do not withdraw from the labor force around the time they claim are increasingly likely to stay in the labor force

the wage elasticity of informal care supply evidence from the health and retirement study author affiliation olena nizalova nizalova kse org ua acknowledgment i gratefully acknowledge steven haider jeff biddle john strauss and john goddeeris for their helpful comments throughout the process of working on the project and important comments from the anonymous referees i am also greatly indebted to michael nolte and his colleagues from the isr data enclave for making possible the revision of this article 1 introductionfor the past two decades the policy debate on issues related to the aging population has been growing at unprecedented rates throughout the world on one hand policy measures suggested in the debate include removal of the disincentives for labor force participation for the near elderly u s dhhs 1997 apfel 2004 cbo 2004 this would have effectively raised the wage rate faced by the targeted group as in the case of the elimination of the social security earnings test for those older than 65 in the united states friedberg 2000 on the other hand the role of informal caregiving is emphasized as a means to keep many individuals at home who would otherwise require expensive institutional care u s dhhs 1997 p 6 policies targeting these two objectives may turn out to conflict with each other higher wages may decrease hours devoted to informal care for elderly parents while policies encouraging informal care may lead to fewer working hours research on the effects of the social security earnings test mostly focuses on labor supply and claiming behavior of the affected group burtless and moffitt 1984 baker and benjamin 1999 gruber and orszag 1999 friedberg 2000 haider and loughran 2008 with little attention being paid to the potential interaction between incentives for paid employment and caregiving choices this interaction may have adverse implications for the well being of the oldest old given that the prevalence of caregiving is highest among individuals in their late midlife central to the analysis of this interaction is the concept of the wage elasticity the labor supply literature suggests a positive wage elasticity of labor supply smaller for males larger for females therefore if the wage elasticity of informal care supply is close to zero as has been found in earlier studies higher wages would lead to more labor supplied with negligible effects on the provision of informal care in this case one might hope that benefits from increased labor supply will not be offset along other dimensions if on the contrary the wage elasticity of informal care supply is relatively large and negative one should be more cautious when evaluating the effects of fiscal policies on labor supply among individuals in their late midlife a substantial negative wage elasticity of informal care supply would mean that along with increasing labor supply the near elderly would cut back on the hours of informal care they provide to their elderly parents this may potentially lead to more people turning to the government in their quest for help with covering formal long term care costs the goal of this article is to study the wage elasticity of informal care supply and contribute to the literature by directly addressing the issue of omitted variables in the time allocation and monetary transfer equations informal care supply is defined as annual time spent helping elderly parents with basic personal needs as well as household chores errands and transportation this article uses a unique opportunity of access to the restricted geographic identifiers for the health and retirement study hrs respondents to instrument hourly wages with the industry structure in the state of residence allowing for differential impact by education 1the primary finding of the article suggests that the wage elasticity of informal care supply is negative and substantially larger in magnitude than previously estimated due to the weakness of the instruments there is still a significant remaining bias in the estimates of the wage elasticity

the optimal size distribution of cities abstract properties of the optimal size distribution of cities are derived by using the hierarchy model explicitly considering the productivity of cities properties are i in allocating workers to the same industry in cities with different hierarchies it is optimal to allocate so that marginal effects upon the gnp are the same ii in allocating workers to different industries in the same city it is optimal to allocate so that the direct marginal effects upon that city s grp are the same iii at optimum all hierarchies have the same weight in a national economy based upon these properties an optimality index for the size distribution of cities is constructed values of this optimality index are estimated for u s and korea the construction and estimation of an optimality index make it possible to investigate the degree and major sources of departures from the optimum

the corporate propensity to save why do corporations accumulate liquid assets we show theoretically that intertemporal trade offs between interest income taxation and the cost of external finance determine optimal savings intriguingly we find that controlling for tobin s q saving and cash flow are negatively related because firms lower cash reserves to invest after receiving positive cash flow shocks and vice versa consistent with theory we estimate negative propensities to save out of cash flow we also find that income uncertainty affects saving more than do external finance constraints therefore contrary to previous evidence saving propensities reflect too many forces to be used to measure external finance constraints

how social security and medicare affect retirement behavior in a world of incomplete markets this paper provides an empirical analysis of how the u s social security and medicare insurance system affect the labor supply of older males in the presence of incomplete markets for loans annuities and health insurance we estimate a detailed dynamic programming dp model of the joint labor supply and social security acceptance decision focusing on a sample of males in the low to middle income brackets whose only pension is social security the dp model delivers a rich set of predictions about the dynamics of retirement behavior and comparisons of actual vs predicted behavior show that the dp model is able to account for wide variety of phenomena observed in the data including the pronounced peaks in the distribution of retirement ages at 62 and 65 the ages of early and normal eligibility for social security benefits respectively we identify a significant fraction of health insurance constrained individuals who have no form of retiree health insurance other than medicare and who can only obtain fairly priced private health insurance via their employer s group health plan the combination of significant individual risk aversion and a long tailed pareto distribution of health care expenditures implies that there is a significant security value for these individuals to remain employed until they are eligible for medicare coverage at age 65 overall our model suggests that a number of heretofore puzzling aspects of retirement behavior can be viewed as artifacts of particular details of the social security rules whose incentive effects are especially strong for lower income individuals and those who do not have access to fairly priced loans annuities and health insurance

the effect of the social security earnings test on male labor supply new evidence from survey and administrative data despite numerous empirical studies there is surprisingly little agreement about whether the social security earnings test affects male labor supply in this paper we provide a comprehensive analysis of the labor supply effects of the earnings test using longitudinal administrative earnings data and more commonly used survey data we find that the response to the earnings test in survey data is obfuscated by measurement error and labor market rigidities accounting for these factors our results suggest a consistent and substantial response to the earnings test especially for younger men

the 1983 social security reforms and labor supply adjustments of older individuals in the long run a structural life cycle retirement model with an improved specification over previous models is used to analyze and compare the long run effects on the labor supply of older workers of the 1983 social security reforms the effects of separate provisions from the 1983 amendments are examined these include the raising of the normal retirement age to 67 the increase in the delayed retirement credit to 8 and the lowering of the reduction rate for earnings over the test amount to 1 00 for every 3 00 of earnings

a structural retirement model the life cycle model analyzed here constrains most work on the main job to be full time partial retirement entails a wage reduction and frequently a job change maximum likelihood estimates of utility function parameters are designed to incorporate information on the age of leaving full time work and the age of full retirement the model closely tracks retirement behavior including peaks in retirement activity at 62 and 65 the paper explores the relation of these peaks to nonlinearities in the budget constraint created by various retirement programs policy analyses based on this and on earlier models with simpler structures are compared the retirement choice is one of the more prominent manifestations of life cycle behavior the decision is the result of an interplay between an individual s preferences and a set of incentives which change in complicated ways as the individual progresses through his or her late 50 s and 60 s the purpose of this study is to formulate and estimate a structural model which incorporates in a fundamental way this interplay between lifetime preferences and incentives and to illustrate how such a model may be used to investigate retirement behavior a structural model of this type is essential for analyzing potential policy changes which can be expected to affect incentives in varying ways over a number of years in the life cycle the current study incorporates two structural features which have frequently been omitted from previous studies first the model requires that an individual who wishes to reduce work effort below full time must accept a reduced hourly wage rate in order to do so this reflects empirical evidence from micro data sets which indicates that around one third of older individuals engage in part time work at one time or another and that regardless of whether or not these older workers change jobs to obtain part time work they usually take wage cuts as compared to their previous full time work 2 the fact that an individual is willing to accept a lower wage rate in return for the opportunity to work fewer than full time hours contains important information about the preferences of the

the labor supply effects of the social security earnings test the social security earnings test taxes away benefits at a 33 50 rate once earnings pass a threshold amount i investigate the response to three past changes in the earnings test rules each applying to some age groups and not others i find that beneficiaries bunch in substantial numbers just below the earnings threshold and the bunching shifts when the earnings test rules change these shifts in the budget constraint are incorporated into an econometric model to identify income and substitution effects the estimation yields significant elasticities that suggest considerable deadweight loss suffered by working beneficiaries

pension reform and labor supply abstract we exploit a comprehensive restructuring of the early retirement system in norway in 2011 to examine labor supply responses to increases in work incentives and actuarially neutral reductions in the age of first access to pension benefits we find that increasing the returns to work is a powerful policy the removal of an earnings test implying a doubling of the average net take home wage led to an increase in average labor supply by 7 h per week 30 at age 63 and by 8 h 46 at age 64 the responses primarily came at the extensive margin in contrast reducing the access age has almost no effect on labor supply in our setting with actuarially fair work incentives

the retirement incentive effects of canada s income security programs canada has a large income security system for retirement that provides significant and widely varying disincentives to work at older ages we provide an empirical analysis of the retirement incentives of the canadian income security system using a new administrative database we find that the work disincentives inherent in the canadian income security system have significant impacts on retirement this suggests that program reform can play a role in responses to fiscal pressures we also demonstrate the importance of controlling for lifetime earnings in retirement models specifications without these controls overestimate the effects of the income security

the effect of age targeted tax credits on labor force participation of older workers abstract i analyze the effect of income tax policy changes on labor force participation of older workers i exploit two age targeted policy initiatives to promote work at older ages simultaneously implemented in sweden in 2007 an earned income tax credit and a payroll tax credit for workers above age 65 using an age based discontinuity in eligibility criteria i conduct a difference in differences analysis with the reform as an instrument for the net of tax rate i find a participation elasticity with respect to the net of participation tax rate of about 0 22 in the year following the 65th birthday for individuals who were working four years earlier

hours restrictions and labor supply the authors estimate a labor supply model that permits hours restrictions of a simple but general form each individual chooses from among a finite set of jobs drawn at random f rom a market distribution each offering a fixed quantity of hours the polar cases of no constraints on hours worked and exogenous hours ar e nested within the general case the authors results are consistent with a substantial amount of rationing in the work hours of a sample of low income men most of whom are working less than they would like copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

back to work expectations and realizations of work after retirement this paper analyzes a puzzling aspect of retirement behavior known as unretirement nearly 50 percent of retirees follow a nontraditional retirement path that involves partial retirement or unretirement and at least 26 percent of retirees later unretire i explore two possible explanations 1 unretirement transitions result from failures in planning or financial shocks and 2 unretirement transitions are anticipated prior to retirement reflecting a more complex retirement process i show that unretirement was anticipated for the vast majority of those returning to work and is not a result of financial shocks poor planning or low wealth accumulation

changing the social security rules for work after 65 this paper simulates the effects of proposed changes in the social security rules including the elimination of the retirement earnings test for men who work after normal retirement age a policy change that was given serious consideration by the social security administration in 1988 89 and that is similar to other proposals made in congress and elsewhere since then is projected to raise long run costs by 43 billion net of taxes and to induce an increase of 3 5 in the number of full time male workers between the ages of 65 and 69 the outcome especially in the short run is greatly affected by the timing of workers decisions to apply for benefits