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Analysing welfare reform in a microsimulation-AGE model: The value of disaggregation

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Author Info
Arntz, Melanie
Boeters, Stefan
Gürtzgen, Nicole
Schubert, Stefanie

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Abstract

We present a consistent microsimulation-AGE model combining the labour market AGE model PACE-L, data from the German Socio-Economic Panel and a discrete choice labour supply estimation. The model is used to analyse a reform that cuts the social assistance minimum income and lowers the transfer withdrawal rate in order to encourage labour force participation at the lower end of the wage distribution. We compare a disaggregated and an aggregated version of the model as well as a partial and a general equilibrium variant. It turns out that both disaggregation and general equilibrium feedback tend to mitigate the labour supply response to the reform proposal. While some labour supply indicators react quite sensitively to the level of aggregation, most macroeconomic variables are considerably more robust.

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Publisher Info
Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 25 (2008)
Issue (Month): 3 (May)
Pages: 422-439
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Handle: RePEc:eee:ecmode:v:25:y:2008:i:3:p:422-439

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  1. Stefan Boeters & Michael Feil & Nicole Gürtzgen, 2007. "Discrete Working Time Choice in an Applied General Equilibrium Model," Computational Economics, Springer, vol. 29(3), pages 427-427, May. [Downloadable!] (restricted)
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  2. John Creedy & Guyonne Kalb, 2005. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Department of Economics - Working Papers Series 928, The University of Melbourne. [Downloadable!]
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  3. Rolf Aaberge & Ugo Colombino & Erling Holmøy & Birger Strøm & Tom Wennemo, 2004. "Population ageing and fiscal sustainability: An integrated micro-macro analysis of required tax changes," CHILD Working Papers wp06_04, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
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  4. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, vol. 3(1), pages 65-80, August. [Downloadable!] (restricted)
  5. Peter Haan, 2004. "Discrete Choice Labor Supply : Conditional Logit vs. Random Coefficient Models," Discussion Papers of DIW Berlin 394, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  6. John Cockburn, 2004. "Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis," Development and Comp Systems 0409012, EconWPA. [Downloadable!]
  7. John Hutton & Anna Ruocco, 1999. "Tax Reform and Employment in Europe," International Tax and Public Finance, Springer, vol. 6(3), pages 263-287, August. [Downloadable!] (restricted)
  8. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September. [Downloadable!] (restricted)
  9. Bovenberg, A. Lans & Graafland, Johan J. & de Mooij, Ruud A., 2000. "Tax reform and the Dutch labor market: an applied general equilibrium approach," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 193-214, October. [Downloadable!] (restricted)
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  10. Snower, Dennis J., 1994. "The Simple Economics of Benefit Transfers," CEPR Discussion Papers 1086, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Bargain, Olivier, 2005. "On Modeling Household Labor Supply with Taxation," IZA Discussion Papers 1455, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. Arntz, Melanie & Boeters, Stefan & Gurtzgen, Nicole, 2006. "Alternative approaches to discrete working time choice in an AGE framework," Economic Modelling, Elsevier, vol. 23(6), pages 1008-1032, December. [Downloadable!] (restricted)
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  13. Stefan Boeters & Reinhold Schnabel & Nicole Gürtzgen, 2006. "Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis," German Economic Review, Blackwell Publishing, vol. 7, pages 363-388, November. [Downloadable!] (restricted)
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  14. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, September. [Downloadable!]
  15. Rutherford, Thomas & Tarr, David & Shepotylo, Oleksandr, 2005. "Poverty effects of Russia's WTO accession : modeling"real"households and endogenous productivity effects," Policy Research Working Paper Series 3473, The World Bank. [Downloadable!]
  16. Graafland, Johan J. & de Mooij, Ruud A., 1999. "Fiscal policy and the labour market: An AGE analysis," Economic Modelling, Elsevier, vol. 16(2), pages 189-219, April. [Downloadable!] (restricted)
  17. Böhringer, Christoph & Boeters, Stefan & Feil, Michael, 2002. "Taxation and unemployment : an applied general equilibrium approach for Germany," ZEW Discussion Papers 02-39, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  1. Sebastian Rausch & Thomas F. Rutherford, 2008. "Computation of Equilibria in OLGModels with Many Heterogeneous Households," Economics working paper series 08/90, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  2. Riccardo Magnani & Jean Mercenier, 2007. "On linking microsimulation and applied GE by exact aggregation of heterogeneous discrete-choice making agents," THEMA Working Papers 2007-06, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
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