Tax Incentives and Older Workers: Evidence from Canada

Guy Lacroix and Pierre-Carl Michaud

Cahiers de recherche / Working Papers from Chaire de recherche Jacques-Parizeau en politiques économiques / Jacques-Parizeau Research Chair in Economic Policy

Abstract: We provide empirical evidence on the effectiveness of a tax measure aimed at increasing the employment rates of older workers in Quebec, Canada. We use several data sources and various identification strategies. First, we use a Quebec-Ontario difference-in-differences design and do not detect robust effects on employment for most age groups except for those aged 60 to 64, but the common trend assumption is found not to hold. For this last group, we use an alternative identification strategy that exploits the variation in treatment intensity over time using longitudinal administrative tax data for Quebec only. Doing so, we do not f ind any effect on transitions in or out of the labour force. We do find a small positive effect on earnings (intensive margin) but a negative one on the affected workers’ net tax liability. Finally, addressing the invalid comparison with Ontario, we investigate the impact of the credit using a staggered adoption design exploiting differences across cohorts within Quebec. The results are consistent with the alternative approach. We conclude that the tax measure does not appear to be a cost-effective way of raising public revenues nor of increasing the employment rates of older workers.

Keywords: older workers; labour market participation; tax incentives. (search for similar items in EconPapers)
JEL-codes: H31 J14 J16 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-age, nep-lab, nep-pbe and nep-pub
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