Working Papers*

* These papers have also subsequently been published as peer-reviewed scientific articles or book chapters. Click here to view these publications.

2018

+ A Canadian Parlor Room-Type Approach to the Long-Term Care Insurance Puzzle
Working Paper 18-04, April 2018
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Authors
M. Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux and Pierre-Carl Michaud
Short summary

Using the results from a survey of 2,000 Canadians, we examine the different hypotheses put forward to explain the low demand for long-term care (LTC) insurance. Defining the natural market of LTC insurance as the one catering to individuals aged between 50 and 70, we find that a remarkable share has never been approached to purchase such protection. We estimate that approximately 60% of this natural market is currently under-served. After eliminating risk perception and demand-side explanations, we conclude that supply-side factors and crowding-out by government programs are the most likely culprits in explaining the low proportion of Canadians who purchase LTC insurance from private providers.

Complete Paper (PDF)

+ Dynamic Causal Effects of Post-Migration Schooling on Labour Market Transitions
Working Paper 18-03, March 2018
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Authors
Marie Albertine Djuikom and Guy Lacroix
Short summary

The government of Canada, through its Skilled Worker Program, selects immigrants based on their education, work experience, knowledge of English and/or French, and other factors. This paper analyzes the employment dynamics of this group of work-ready immigrants in Quebec. We further study the impact of domestic education on future spells of employment and unemployment.  We distinguish between "Qualified" and "Unqualified" jobs (corresponding or not corresponding to qualification), education and unemployment in a multiple-spells and multiple-states model.  Our results indicate that immigrants from well-off countries have no need to further invest in domestic education. Highly qualified immigrants from poorer countries, however, benefit greatly from such training in the long run as it eases their transitions out of unemployment and out of unqualified jobs.

Complete Paper (PDF)

+ The Effect of Education on Health: Evidence from National Compulsory Schooling Reforms
Working Paper 18-02, March 2018
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Authors
Raquel Fonseca, Pierre-Carl Michaud and Yuhui Zheng
Short summary

We combine 3 surveys that cover individuals aged 50 and over in 15 OECD countries. We then use variation in the timing of educational reforms across these countries to investigate the effects of education on health outcomes. Using statistical models that control for possible reverse causality, we find evidence that in several countries, more years of education lead to lower probabilities of self-reported poor health or functional status, and to lower prevalence of diabetes. These effects are larger than without controlling for possible reverse causality. The relationship between education and cancer is positive using either model, while the causal impacts of education on other chronic conditions are not established and require further investigation.

Complete Paper (PDF)

+ Comparing the Education Gradient in Chronic Disease Incidence Among the elderly in Six OECD Countries
Working Paper 18-01, January 2018
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Authors
Aurélie Côté-Sergent, Raquel Fonseca and Erin Strumpf
Short summary

We examine the health-education gradient in the 2000s among older adults in the United States, Canada, France, the Netherlands, Spain and Italy. Using longitudinal survey data, we assess how incidence rates of poor health, of difficulties with activities of daily living, and of chronic conditions vary by educational attainment across countries. We also examine how potential confounders – demographic characteristics, income, health care use and health behaviours – affect the health-education gradient within countries over time. We find systematic differences in disease incidence, as well as in the health-education gradients, across countries. We also demonstrate that while adjusting for confounders generally diminishes the health-education gradient, the impacts of these variables vary somewhat across countries.

Complete Paper (PDF)

2017

+ Hospital Readmission is Highly Predictable from Deep Learning
Working Paper 17-05, December 2017
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Authors
Damien Échevin, Qing Li and Marc-André Morin
Short summary

We develop and test a method that can be applied generally by hospitals to improve readmission prediction. Relying on state-of-the art machine learning algorithms, we predict the probability of 30-day readmission at initial admission and at discharge using administrative data on 1,633,099 hospital stays in Quebec between 1995 and 2012. Deep Learning produces excellent predictions of readmission province-wide, and Random Forest reaches similar levels. The area under receiver operating characteristic curve for these two algorithms reaches over 78% at hospital admission and over 87% at hospital discharge, and the diagnostic codes are among the most predictive variables. The ease of implementation of machine learning algorithms, together with objectively validated reliability, brings new possibilities for cost reduction in the health care system.

Complete Paper (PDF)

+ Premature Deaths, Accidental Bequests and Fairness
Working Paper 17-04, November 2017
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Authors
Marc Fleurbaey, Marie-Louise Leroux, Pierre Pestieau, Grégory Ponthière and Stéphane Zuber
Short summary

While little agreement exists regarding the taxation of bequests in general, there is a widely held view that accidental bequests should be subject to a confiscatory tax. We reexamine the optimal taxation of accidental bequests in an economy where individuals care about what they leave to their offspring in case of premature death. We show that, whereas the conventional 100 %-tax view holds under the standard “utilitarian social welfare” criterion, it does not hold under the “ex post egalitarian” criterion, which assigns a strong weight to the welfare of unlucky short-lived individuals. Under the latter, it is optimal to subsidize accidental bequests, rather than tax them. We also show that, although the sign of an optimal tax depends on the form of the “joy of giving” motive, it remains true that the 100 %-tax view does not hold under the ex post egalitarian criterion.

Complete Paper (PDF)

+ Physical Disability and Labor Market Discrimination: Evidence from a Field Experiment
Working Paper 17-03, November 2017
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Authors
Charles Bellemare, Marion Goussé, Guy Lacroix and Steeve Marchand
Short summary

We investigate labor market discrimination toward wheelchair users using data from a large-scale field experiment conducted in the province of Quebec (Canada). Applications were randomly sent to 1,477 private firms operating in two urban areas and advertising open positions requiring various skill levels. The applications were randomly generated to cover a broad spectrum of potential determinants of discrimination (gender, skill level, work history, workplace adjustment costs, etc.). We find average callback rates of disabled and non-disabled applicants of 14.4% and 31%, respectively. We investigate whether the differential may result from accessibility constraints related to the physical infrastructures where firms are located; the latter are found to have no explanatory power, as do explicit mentions in applications if a candidate is eligible to a government subsidy to cover the cost of workplace adaptations and assistive technology.

Complete Paper (PDF)

+ Whistle While You Work: Job Insecurity and Older Workers’ Mental Health in the United States
Working Paper 17-02, October 2017
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Authors
Italo A. Gutierrez, Pierre-Carl Michaud
Short summary

We estimate the effects of job insecurity on older workers’ health outcomes using downsizing episodes and state-industry level changes in employment. We provide evidence that job insecurity, as measured by the self-reported probability of job loss, increases stress at work and the risk of clinical depression and lowers self-reported health status. We interpret our findings as evidence that job insecurity which is outside the control of workers may have large effects on mental health. These findings suggest that employers ought to consider actions to offset the detrimental health effects of reducing personnel on their remaining (older) workers, and pay attention to the stress that industry level changes in economic conditions may induce among workers.

Complete Paper (PDF)

+ Long-term Care Insurance: Knowledge Barriers, Risk Perception and Adverse Selection
Working Paper 17-01, September 2017
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Authors
Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, Pierre-Carl Michaud
Short summary

We conduct a survey where we ask respondents to rate various insurance products aimed at protecting against long-term care financial risks. We use price variation built into the survey, as well as objective care and death risks for Canada and respondents’ purchasing probabilities, to predict market equilibrium for long-term care insurance. We then investigate the low take-up of long-term care insurance and find that 44% of respondents without insurance were never offered any, and 31% of the overall sample had no knowledge of the product. Our results suggest self-selection of high-risk individuals plays a minimal role in limiting take-up. Once respondents are made aware of the risks, we find that demand remains low because of risk misperceptions, lack of bequest motive, and home ownership.

Complete Paper (PDF)

2016

+ Working Time Regulation, Unequal Lifetimes and Fairness
Working Paper 16-11, December 2016
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Authors
Marie-Louise Leroux, Grégory Ponthiere
Short summary

We examine the redistributive impact of working time regulations in an economy with unequal lifetimes. We show that when hourly wages are kept constant, uniform working time reductions can reduce inequalities in lifetime well-being between short-lived and long-lived persons with respect to the laissez-faire, but they make the short-lived worse off. When total labour earnings are kept constant instead, uniform working time reductions make the short-lived better off, but they raise inequalities. We provide an argument for age-dependent working time regulation, which involves hours worked that increase with age and can make the short-lived better off while reducing inequalities in lifetime well-being.

Complete Paper (PDF)

+ Retirement and Cognitive Functioning: International Evidence*
Working Paper 16-10, December 2016
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Authors
Raquel Fonseca, Arie Kapteyn, Gema Zamarro
Short summary

We survey the recent literature on the effects of retirement on cognitive functioning at older ages around the world. We describe results from studies using similar data, definitions and methods to capture causal effects. The studies yield widely varying results. Most papers find that being retired leads to a decline of cognition. However, the size and significance of the estimated effects vary dramatically depending on methods. We replicate several of these results using the same data sets. We discuss the factors that are likely causing the differences observed, and find that results are sensitive to the inclusion of “country effects”, suggesting a key role for unobserved differences across countries that affect both retirement ages and cognitive decline.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Retirement Behavior in the U.S. and Europe
Working Paper 16-09, December 2016
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Authors
Jochem de Bresser, Raquel Fonseca, Pierre-Carl Michaud
Short summary

We develop a retirement model featuring various labor market exit routes: unemployment, disability, private and public pensions. The model allows for saving and uncertainty along several dimensions, including health and mortality. Individuals’ preferences are estimated on data from the U.S. and Europe using institutional variation across countries. We analyze the roles of preferences and institutions in explaining international heterogeneity in retirement behavior. Preliminary estimates suggest that a single set of preferences for individuals from the U.S., the Netherlands and Spain does not fit the data well. Were Europeans to have the same preferences as Americans, they would save less than they actually do. Furthermore, the Dutch and Spanish would work more hours than is observed in the data.

Complete Paper (PDF)

+ Les effets de l’équilibre budgétaire et du transfert canadien en santé sur les finances publiques du Québec
Working Paper 16-08, December 2016
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Authors
Nicholas-James Clavet, Guy Lacroix, Pierre-Carl Michaud, Alexandre Parent
Short summary

Using a simulation tool, we analyze four scenarios that allow to us to measure the effects over 20 years of 1) maintaining the budget balance for 4 years, and 2) a growth in the Canada Health Transfer (CHT) at its historical pace. In the reference scenario, which assumes structural expenditure growth rates consistent with the pre-budgetary rigour period and a CHT increasing at a slower pace than in the past, Quebec public expenditures should increase by G$166.6 by 2035, while revenue will only increase by G$106. Furthermore, a CHT growing at 6% annually would not be enough to meet budget balance and public debt objectives. Additional efforts to limit spending or enhance revenue will be required to meet these targets.

Complete Paper (PDF)

+ Self-Employment, Wealth and Start-up Costs: Evidence from a Financial Crisis
Working Paper 16-07, September 2016
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Authors
Koffi Elitcha, Raquel Fonseca
Short summary

Financial constraints affect individuals’ decision to become self-employed, suggesting a positive relationship between the propensity to become entrepreneur and personal wealth. Recent evidence confirms this hypothesis, and shows that the importance of the entrepreneurship—wealth relationship increases with the extent of liquidity constraints and flattens with the magnitude of start-up costs. Using individual-level data from 3 European and U.S. surveys as well as the World Bank, we investigate the impact of start-up costs on the self-employment—wealth relationship. Results confirm the strong positive relationship between entrepreneurial choice and wealth, as well as the negative effect stemming from an increase in start-up costs. Although there is no strong evidence that wealth in itself played a bigger role during the last global financial crisis, the negative impact of higher start-up costs on wealth proved significant.

Complete Paper (PDF)

+ Analyse de la rentabilité économique des scénarios de réforme du RRQ proposés en 2016
Working Paper 16-06, September 2016
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Authors
David Boisclair, Simon Brière, Guy Lacroix, Steeve Marchand, Pierre-Carl Michaud
Short summary

We use simulation methods to analyze the impacts of the most recent proposals to reform the Quebec Pension Plan – those put forward in June, 2016 by the Quebec and Canadian governments. Accounting for uneven life expectancy by level of education, earnings variability, and interactions with the tax and retirement income systems, we compute internal rates of return (IRR) for 78 types of individuals. The actual rate of return on new contributions is comparable to that of other financial products. Although IRR are comparable for individuals earning more than $25,000 on average under the two proposed reforms, the federal proposal yields higher income replacement rates and provides more attractive IRR for individuals with earnings at the bottom of the distribution.

Complete Paper (PDF)

+ Discrimination à l’embauche des candidates d’origine maghrébine dans la région de la Capitale-Nationale*
Working Paper 16-05, May 2016
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Authors
Simon Brière, Bernard Fortin, Guy Lacroix
Short summary

Using a resume mailing experiment carried out in Quebec City, this paper seeks to identify whether – with identical resumes – “Samira Benounis” would get fewer job interviews than “Valérie Tremblay”. Our results show that, all else equal, when the candidate’s name is of North African rather than of Quebec origin, the probability of the candidate getting a job interview decreases by 11%. This suggests hiring discrimination against job seekers of North African origin in the Quebec City region, in the context of an increasingly important demographic role for immigration in Quebec.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Nursing Home Choice, Family Bargaining and Optimal Policy in a Hotelling Economy
Working Paper 16-04, May 2016
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Authors
Marie-Louise Leroux, Grégory Ponthiere
Short summary

We study the impact of the distribution of bargaining power within the family on the choices of nursing homes, and on the location and prices chosen by nursing homes. When the dependent parent only cares about distance, whereas his child cares also about price, the mark-up rate of nursing homes increases with the bargaining power of the dependent parent. We contrast the laissez-faire with the social optimum, and show how the latter can be decentralized 1) in a first-best setting and 2) when the government cannot force location. Finally, we consider families with more than one child and introduce wealth accumulation, which allows us to study the joint dynamics of wealth and nursing home prices. We find that a larger capital stock raises the price of nursing homes.

Complete Paper (PDF)

+ Pensions, annuities, and long-term care insurance: On the impact of risk screening
Working Paper 16-03, March 2016
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Authors
Martin Boyer, Franca Glenzer
Short summary

We examine the interaction between the choice of a retirement saving vehicle and the purchase of long-term care insurance in a world where agents learn over time about their long-term care (LTC) risk. Absent any LTC issues, acquiring a savings product before learning one’s health status (or risk type) would be preferred by risk averse agents. When the possibility of needing LTC is introduced, some agents will prefer to wait until they know their health status before purchasing a retirement product (a situation akin to having a defined-contribution pension plan), whereas others will opt to purchase their retirement product before learning their health status (a situation akin to having a defined-benefit pension plan). The preference for one retirement saving vehicle over the other depends on several factors. When agents purchase their retirement vehicle after (resp. before) learning their health status, then agents will choose a contract that provides (resp. less than) full LTC insurance coverage.

Complete Paper (PDF)

+ The commitment value of funding pensions*
Working Paper 16-02, February 2016
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Authors
Jean-Denis Garon
Short summary

This paper studies how funding public pensions can improve policy outcomes when short-sighted governments cannot commit. We focus on sustainable plans, where “optimal” pensions are not reneged on by subsequent governments. Funding pensions is a commitment mechanism. It implies lower contributions than does the second best policy, which reduces temptation to over-redistribute later. Funding may be preferable even if the population growth rate is higher than the rate of return on assets. “Second best” optimal policies are also more likely to be renegotiation-proof under fully funded pensions.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Réduction des maladies cardiovasculaires et dépenses de santé au Québec à l’horizon 2050*
Working Paper 16-01, January 2016
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Authors
David Boisclair, Yann Décarie, François Laliberté-Auger, Pierre-Carl Michaud
Short summary

Cardiovascular diseases (CVD), including hypertension and strokes, account for an important share of mortality and direct health costs in Quebec. In this study, we use a microsimulation model to project public expenditure on hospitalizations and physician consultations to 2050, under various scenarios of the evolution of CVD. A plausible scenario, of an immediate 30% decrease in CVD incidence due to better prevention, yields cumulative savings of $21 billion in present value, to which another $66 billion (in 2012 $) can be added for the economic value of the life-years saved over the period.

Complete Paper (PDF)
Peer-Reviewed Paper

2015

+ Compliance, Informality and contributive pensions
Working Paper 15-19, December 2015
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Authors
Marie-Louise Leroux, Dario Maldonado, Pierre Pestieau
Short summary

We consider a model in which agents have the possibility of hiding some of their earnings in order to avoid taxation. Taxes only finance a pension system, which includes a contributory and a universal component. Without non-compliance costs, agents are indifferent to the tax rate as in response they can adjust their level of compliance; the pension system must be at least partially contributory in order to increase tax compliance and, thus, the tax base. With non-compliance costs, the majority-voted tax rate is more likely to be high when the median income is low and when the return from public pensions dominates that of private savings. The size of the contributory component will now result from a trade-off between increased political support, direct redistribution toward the worst-off agent, and a larger tax base.

Complete Paper (PDF)

+ Changements démographiques au Québec: vers une décroissance de l’emploi d’ici 2050?*
Working Paper 15-18, December 2015
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Authors
Luc Bissonnette, David Boisclair, François Laliberté-Auger, Steeve Marchand, Pierre-Carl Michaud
Short summary

Using a model that simulates demography and socio-economic behaviours at the individual level, we project the level of employment for Quebec until 2050. The results are contrasted with projections carried out by the Régie des rentes du Québec in 2013, as well as with projections that hold education levels and employment behaviours constant. Despite the aging of the population, which will bring about a shrinking of the working-age population, recent labour market behaviours suggest that Quebec will experience increased employment rates, especially among older workers. Employment growth between 2015 and 2050 should therefore be higher than anticipated. Our results suggest that this growth will dampen the effects of population aging by sustaining economic growth.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Les déterminants du travail autonome au Québec et au Canada (1993-2010)*
Working Paper 15-17, November 2015
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Authors
Raquel Fonseca, Simon Lord
Short summary

Using longitudinal data from the Survey of Labour and Income Dynamics, this paper studies the determinants of self-employment in Québec and in the rest of Canada by focusing on liquidity constraints, age and aggregate unemployment. The main results are that: the positive effect of investment income on the probability of being self-employed confirms the existence of liquidity constraints; being older increases the probability of choosing self-employment, suggesting that working for oneself may be a stepping stone towards retirement; a high unemployment rate decreases the probability of being self-employed, which suggests that pull factors dominate push factors.

This paper has been the topic of a CIRANO Note.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Labor Market Policies and Self-Employment Transitions of Older Workers
Working Paper 15-16, November 2015
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Authors
Dimitris Christelis, Raquel Fonseca
Short summary

We study transitions in and out of self-employment of older individuals using internationally comparable survey data from 13 OECD countries. We examine the influence on self-employment transitions of several labor market policies and institutional factors, as well as individual characteristics like physical and mental health. Self-employment among older individuals is strongly affected by government policies: larger expenditures on employment incentives impact it positively, while the opposite is true for expenditures on early retirement and unemployment benefits.

Complete Paper (PDF)

+ Distributional Effects of Social Security Reforms: the Case of France
Working Paper 15-15, November 2015
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Authors
Raquel Fonseca, Thepthida Sopraseuth
Short summary

This paper quantifies the long-run distributional impact of two Social Security reforms: modifying the parameters of a defined benefit (DB) plan (“Ayrault’s reform” in France) and switching to a notional defined contribution (NDC) plan (“Italian reform”). For different reasons, low-skilled workers are the main losers with both reforms. Under Ayrault’s reform they delay retirement by 2 years, while in switching to a NDC scheme their pensions fall substantially. The switch from a DB to a NDC plan yields substantial welfare losses; pensions fall drastically, and individuals save more. Since low-skilled workers do not save as much as medium- or high-skilled workers, this reform leads to a more unequal distribution of assets.

Complete Paper (PDF)

+ Intertemporal pro-poorness
Working Paper 15-14, July 2015
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Authors
Florent Bresson, Jean-Yves Duclos, Flaviana Palmisano
Short summary

The impact of growth on poverty is better understood when taking into account income dynamics. We use an ‘intertemporal pro-poorness’ formulation that accounts separately for the benefit of “mobility as equalizer” and the social variability cost of poverty transiency. Several decompositions are proposed to measure the importance of each of these impacts of growth on the pro-poorness of distributional changes. The framework is applied to panel data on 23 European countries drawn from the European Union Statistics on Income and Living Conditions (EU-SILC) survey.

 

Complete Paper (PDF)

+ The Concentration of Hospital-Based Medical Spending: Evidence from Canada*
Working Paper 15-13, July 2015
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Authors
Aurélie Côté-Sergent, Damien Échevin, Pierre-Carl Michaud
Short summary

We analyze hospital-based medical spending using longitudinal administrative data from the province of Quebec, Canada. We document how medical spending is concentrated cross-sectionally, over time and near the end of life. Average expenditures rise rapidly with age starting around 50 y.o., and are concentrated among a few high-cost users (e.g. the top 1% of individuals account for 55% of spending). Persistence among high-cost users is low, however: fewer than 3% of those in the top quintile of spending remain in that quintile the following year, and only 5% have any spending the following year. Finally, hospital-based medical spending among those who die at the hospital within a year accounts for 11% of spending for the population as a whole. More than 80% of that end-of-life spending occurs in the last month of life.

This paper has been the topic of a CIRANO Note.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Utilisation et coût de l’hébergement avec soins de longue durée au Québec, 2010 à 2050*
Working Paper 15-12, June 2015
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Authors
François Laliberté-Auger, Aurélie Côté-Sergent, Yann Décarie, Jean-Yves Duclos, Pierre-Carl Michaud
Short summary

If population health trends in Quebec remain the same, we estimate that nursing home care needs will increase 2.6-fold between 2010 and 2050. The number of people in nursing homes will thus increase to about 196,100 in 2050, and the related costs to $8.4 billion (in 2010 dollars, assuming fixed structural costs). This represents an increase of $5.2 billion compared to 2010. If the number of places subsidized by the Quebec government (45,000 in 2012) remains unchanged, many people requiring nursing home care will have to turn to the private sector, which currently costs between $850 and $6,000 monthly; or they could end up hospitalized, which would increase pressures on the health care system.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Employer downsizing and older workers’ health
Working Paper 15-11, June 2015
PDF
Authors
Italo A. Gutierrez, Pierre-Carl Michaud
Short summary

We estimate the effects of employer downsizing on older workers’ health outcomes using different approaches, most of which yield results suggesting that downsizing increases the probability that older workers rate their health as fair or poor; increases the risk of showing symptoms of clinical depression; increases the risk of being diagnosed with stroke, arthritis, and psychiatric or emotional problems; and increases the risk of showing high levels of inflammation. We find that downsizing affects health through job insecurity and stress, but also likely through other mechanisms such as diminished morale and general demotivation. Our findings indicate that employers ought to consider actions to offset the detrimental health effects of reducing personnel on their remaining (older) workers. 

Complete Paper (PDF)

+ Une alternative à la réforme du financement des services de garde au Québec
Working Paper 15-10, June 2015
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Authors
Nicholas-James Clavet, Jean-Yves Duclos
Short summary

We estimate that the reform of child care financing recently introduced in Quebec leads to a reduction of $169 million in the disposable income of families with children 5 years and under; 48% of families lose from the reform. The alternative recommended by the Commission de révision permanente des programmes and the Commission d'examen sur la fiscalité québécoise would result in a (substantially lower) decrease of $15 million in family disposable income; 79% of families would not lose with this reform (97% of families in the first quintile would be winners, as opposed to 0% with the recent reform). This would also increase the government’s net revenue by $215 million (instead of $204 million). This alternative reform would thus be more advantageous than the one recently implemented, both for Quebec families and for the provincial government. It would also increase the federal contribution to the financing of child care, and better align this contribution with the one benefitting families in other provinces.

This paper has been the topic of a CIRANO Note.

Complete Paper (PDF)

+ Quel impact la fiscalité québécoise a-t-elle sur les incitations au travail ?*
Working Paper 15-09, June 2015
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Authors
Arnaud Blancquaert, Nicholas-James Clavet, Jean-Yves Duclos, Bernard Fortin, Steeve Marchand
Short summary

Quebec’s system of taxation and social transfers, relative to Ontario’s, generates large marginal effective tax rates (METR) and participation tax rates (PTR) on labor income. This is largely due to the steep claw back of transfers following increases in Quebecers’ labor income. Quebec’s METRs are particularly high and variable between $0 and $50,000. The METR of two-parent families with income around $20,000 even exceeds 125%; 40% of two-parent families face a METR that exceeds 50%. A better integration of the tax and transfer systems would result in greater transparency, better distributional effects and greater administrative and economic efficiency.

Complete Paper (PDF)
Peer-Reviewed Paper
+ The political economy of (in)formal long term care transfers*
Working Paper 15-08, April 2015
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Authors
Philippe De Donder, Marie-Louise Leroux
Short summary

Why are long-term care (LTC) social transfers so small in most countries? First, informal help may be politically preferred to LTC social transfers when dependent parents have a strong preference for such a form of assistance. Second, when the parents’ probability of becoming dependent is low, the children of autonomous parents may be numerous enough to democratically oppose the introduction of LTC social transfers. Third, a political majority may dislike small LTC social transfers and prefer much larger transfers (though these may completely crowd out family help). In such a context, an incremental introduction of LTC social transfers may be politically unfeasible: LTC transfers would need to be introduced at a large scale to receive sufficient political support, something that is rarely observed in the real world.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Peer Effects, Fast Food Consumption and Adolescent Weight Gain*
Working Paper 15-07, April 2015
PDF
Authors
Bernard Fortin, Myra Yazbeck
Short summary

Can friendship influence adolescent weight gain? Using Add Health data on US secondary schools, this paper indeed finds the presence of positive peer effects, significant though small, on junk food consumption. The results indicate for example that, in the long term, an additional weekly meal at a fast food restaurant increases adolescent standardized body mass index by 4.5% when peer effects are ignored and by 5.1% when peer effects are taken into account, this net effect being higher than the individual effect because friendship networks help transmit bad eating habits.

Complete Paper (PDF)
Peer-Reviewed Paper
+ The Evolution of Hourly Compensation in Canada between 1980 and 2010*
Working Paper 15-06, March 2015
PDF
Authors
Jean-Yves Duclos, Mathieu Pellerin
Short summary

We find that wage inequality (as measured by the coefficient of variation) among full-time workers has almost doubled between 1980 and 2010. The rapid growth among the top 0.1% is the main driver of that increase. Changes in the characteristics of the workforce (such as age, experience and education) explain less than 25% of the rise in wage inequality; the rest is explained by increasing within-group inequality. However, changes in worker characteristics explain most of the increase in average hourly compensation over those three decades.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Using a Life Cycle Model to Evaluate Financial Literacy Program Effectiveness*
Working Paper 15-05, March 2015
PDF
Authors
Annamaria Lusardi, Pierre-Carl Michaud, Olivia S. Mitchell
Short summary

We investigate how financial education programs optimally shape key economic outcomes: wealth accumulation, financial knowledge, and participation in sophisticated assets (e.g. stocks). We then find that the more effective programs provide follow-up in order to sustain the knowledge acquired by employees via the programs; this follow-up can raise the value of savings at retirement by close to 10%. By contrast, one-time education programs produce short-term effects but few long-term ones.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Effective Age of Retirement: Innovative Methodology and Recent Experience
Working Paper 15-04, February 2015
PDF
Authors
Maxime Comeau, Denis Latulippe
Short summary

Innovative ways to estimate retirement age make it possible to assess better effective retirement from employment and not only to focus on labor force participation rates. This makes it also possible to distinguish better between retirement from full-time employment and part-time employment. It is found that average effective retirement age is indeed lower when only considering retirement from full-time employment rather than considering jointly retirement from both full-time and part-time employment. The emerging trend towards an increase in effective retirement age is not simply the fact of a gradual retirement, but also encompasses retirement from full-time employment. Results for four countries (Austria and Germany, Ireland and the United Kingdom) reveal diverging experiences.

Complete Paper (PDF)

+ Eliciting Subjective Survival Curves: Lessons from Partial Identification*
Working Paper 15-03, February 2015
PDF
Authors
Luc Bissonnette, Jochem de Bresser
Short summary

Bounds for subjective survival curves and subjective life expectancy are constructed by interpolating beliefs between data points and by allowing for rounding of the data. This helps explain objective correlations of life expectancy with age and self-reported health. Women expect to live shorter on average than the published life-tables predict, the difference being the largest around the age of 60. Men have expectations that are on average in line with the actuarial forecasts.

Complete Paper (PDF)
Peer-Reviewed Paper
+ The Financial Crisis and Consumers’ Income and Pension Expectations*
Working Paper 15-02, February 2015
PDF
Authors
Luc Bissonnette, Arthur Van Soest
Short summary

An analysis of the pension expectations of Dutch economic agents in the 2009-2012 period of economic crisis reveals that substantial heterogeneity prevailed in those expectations, and that there has been greater pessimism amongst the high educated. Crisis perceptions also contain private and plausible information on how the crisis affects different families in different ways. The expectations of large groups of people may, however, be unrealistically positive for some groups, such as those with lower income. This may be of concern for policy since these groups may also have fewer possibilities to adjust their life style or to rely on other resources if their pension income were to fall.

Complete Paper (PDF)
Peer-Reviewed Paper
+ Quality, Quantity and Duration of Lives*
Working Paper 15-01, February 2015
PDF
Authors
Jean-Yves Duclos, Bouba Housseini
Short summary

Assessing development and public policies often requires comparing social states that differ in income distributions, population sizes and individuals’ longevity. Depending on the approach taken to weight the quality, the quantity and the duration of lives, global social welfare in 2010 can be deemed to be between 1.8 and 407 times that of 1910. The importance given to the quantity of lives is particularly important in that assessment.

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2014

+ Reforming Old Age Security: Effects and Alternatives*
Working Paper 14-10, December 2014
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Authors
Nicholas-James Clavet, Jean-Yves Duclos, Bernard Fortin, Steeve Marchand
Short summary

The postponement from 65 to 67 of the federal old-age pension eligibility age will increase net federal revenues by 7.1 billion dollars (in constant 2014 dollars) per year by 2030, but reduce net provincial revenues by 638 million dollars. With constant labour and savings behaviour, this should also raise poverty (low income) rates from 6% to 17% for those aged 65 and 66 years group, and would be most harmful to low-income seniors and to women. Alternative reforms could achieve similar public finance objectives without such large impacts on poverty rates among seniors.

This paper has been the topic of a CIRANO Note.

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+ Does Retirement Make you Happy? A Simultaneous Equations Approach*
Working Paper 14-09, December 2014
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Authors
Raquel Fonseca, Arie Kapteyn, Jinkook Lee, Gema Zamarro
Short summary

Accounting for the joint determination of retirement, income, depression, and life satisfaction, it is found that retirement reduces the probability of depression and increases life satisfaction, but that income does not affect much depression or life satisfaction, once other factors are accounted for. Household wealth, being married, and educational attainment increase life satisfaction and reduce the probability of depression; the opposite is true for difficulties with activities of daily living.

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+ Effets des tendances à long-terme de l’obésité sur l’utilisation de soins de santé au Québec
Working Paper 14-08, December 2014
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Authors
Aurélie Côté-Sergent
Short summary

Using a dynamic microsimulation model to project health and obesity prevalence in the Québec population indicates that a counterfactual elimination of obesity would reduce (annually and over the 2010-2050 period) by 864,055 the number of short-term hospitalization nights and by 665,000 the number of consultations with general practitioners and specialists, but would also lead to a significant increase in the number of insititutionalized individuals. It also appears from the analysis that obesity is responsible for 2.6% of health spending in Quebec and that it leads to 14% higher health care spending over a lifetime.

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+ COMPAS: Un modèle de microsimulation santé pour le Québec
Working Paper 14-07, December 2014
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Authors
David Boisclair, Aurélie Côté-Sergent, Jean-Yves Duclos, Alexandre Lekina, Steeve Marchand, Pierre-Carl Michaud
Short summary

This report describes the design and structure of COMPAS, a dynamic microsimulation model that projects the evolution of health status (including mortality) of a representative sample of Quebecers throughout their life cycle and the associated use of medical resources in connection with this health status. The model can be used to analyze a single cohort over time, or the entire population as it evolves with new entrants. The use of COMPAS predicts for instance that the prevalence of hypertension in 2050 will be about 21% for those aged 70-74 years and that individuals aged 30 years in 2050 will live, on average, 3.3 years longer than individuals aged 30 years in 2010.

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+ An economic analysis of proposals to improve coverage of longevity risk*
Working Paper 14-06, December 2014
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Authors
David Boisclair, Jean-Yves Duclos, Steeve Marchand, Pierre-Carl Michaud
Short summary

Simulation methods are used to analyze the impacts of recently proposed reforms to cover longevity risk: a key proposal of the D’Amours committee (the longevity pension); a proposal by Mintz and Wilson to increase the generosity of the existing QPP/CPP; and one by Wolfson to make contribution and benefit rates vary with earnings. The internal rate of return (IRR) of each of these proposals is computed taking into consideration inequality in life expectancy, temporal variability of earnings, and interactions with taxation and the different retirement income support programs. For all the reforms, the rates of return are higher for individuals with higher levels of education and often reach a maximum for average annual income levels between $25,000 and $45,000.

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+ Une analyse économique de propositions visant à bonifier la couverture du risque de longévité*
Working Paper 14-05, December 2014
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Authors
David Boisclair, Jean-Yves Duclos, Steeve Marchand, Pierre-Carl Michaud
Short summary

Simulation methods are used to analyze the impacts of recently proposed reforms to cover longevity risk: a key proposal of the D’Amours committee (the longevity pension); a proposal by Mintz and Wilson to increase the generosity of the existing QPP/CPP; and one by Wolfson to make contribution and benefit rates vary with earnings. The internal rate of return (IRR) of each of these proposals is computed taking into consideration inequality in life expectancy, temporal variability of earnings, and interactions with taxation and the different retirement income support programs. For all the reforms, the rates of return are higher for individuals with higher levels of education and often reach a maximum for average annual income levels between $25,000 and $45,000.

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+ Individual Survival Curves Comparing Subjective and Observed Mortality Risks*
Working Paper 14-04, November 2014
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Authors
Luc Bissonnette, Michael D. Hurd, Pierre-Carl Michaud
Short summary

This paper’s estimation of survival curves leads to estimates of remaining life expectancy for various American population groups as well as to expectations of joint survival and widowhood by household. Subgroups such as blacks, more educated respondents, smokers and respondents from younger cohorts are in general over-optimistic regarding their survival prospects.

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+ Longévité différentielle et redistribution : enjeux théoriques et empiriques*
Working Paper 14-03, November 2014
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Authors
Marie-Louise Leroux, Pierre Pestieau, Grégory Ponthiere
Short summary

Three reasons support the redistribution of resources towards agents with lower longevity: aversion to intertemporal inequality, aversion to the risk of death, and compensation for features for which agents cannot be held responsible. This article analyzes the implications of the existence of strong differences in longevity for the design of public policies, particularly those related to retirement, which usually redistribute resources from agents with short lives towards agents with longer lives.

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+ The Effect of Job Loss on Health: Evidence from Biomarkers*
Working Paper 14-02, November 2014
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Authors
Pierre-Carl Michaud, Eileen Crimmins, Michael Hurd
Short summary

The effect of job loss on health may explain part of the correlation between socio-economic conditions and health. The paper finds no evidence that business closures lead to worse health outcomes, but does find evidence that layoffs lead to diminished health. Accounting for self-reported health conditions prior to the layoff and subjective job loss expectations, it is estimated that a layoff could increase annual mortality rates by close to 10%.

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+ Projections de l'état de santé de la population québécoise et impacts sur le risque de longévité d'un régime de retraite à prestations déterminées*
Working Paper 14-01, November 2014
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Authors
Aurélie Côté-Sergent, Jean-Yves Duclos, Alexandre Lekina, Steeve Marchand, Pierre-Carl Michaud
Short summary

The use of COMPAS’s microsimulation techniques allows to study the possible impact of technological progress on population longevity and on the longevity risks incurred by pension plans. The funding ratio for a stylized defined-benefit pension plan could lie between 0.24 and 0.74 in 2050 according to the technological progress scenarios analyzed in this paper, indicating that such plans could run into a considerable funding deficit. The results also indicate that the RRQ’s mortality reduction assumptions seem rather optimistic for the 30-65 year old population, but consistent with the advice of a recent panel of health experts for those 80 years and older. 

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