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Modelling the Dynamic Effects of Transfer Policy: The LINDA Policy Analysis Tool

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  • Justin van de Ven

    ()
    (National Institute of Economic and Social Research, London; Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Paolo Lucchino

    (National Institute of Economic and Social Research, London)

Abstract

This paper describes a structural dynamic microsimulation model that generates individual-specific data over a range of demographic and economic characteristics at annual intervals over the life-course. The model is specifically designed to analyse the distributional implications of policy alternatives in terms of their bearing on income and consumption measured over alternative time periods, from one year up to the entire life-course. This focus on economic characteristics measured over appreciable periods of life motivates endogenous simulation of savings and labour supply decisions, taking explicit account of uncertainty regarding the evolving decision environment. Reflecting the demands of policy makers, and in contrast to the majority of the associated literature, the model described here is designed to project from data observed for a population cross-section.

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Bibliographic Info

Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2013n20.

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Length: 40pp
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:iae:iaewps:wp2013n20

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Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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Keywords: Dynamic programming; savings; labor supply;

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References

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  1. James Choi & David Laibson & Brigitte Madrian & Andrew Metrick, 2005. "Optimal Defaults and Active Decisions," Levine's Bibliography 666156000000000488, UCLA Department of Economics.
  2. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-99, April.
  3. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, April.
  4. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
  5. Zeldes, Stephen P, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 275-98, May.
  6. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  7. Igor Livshits & James MacGee & Michele Tertilt, 2005. "Consumer Bankruptcy: A Fresh Start," Discussion Papers 04-011, Stanford Institute for Economic Policy Research.
  8. James Sefton & Justin vandeVen, 2009. "Optimal Design of Means Tested Retirement Benefits," Economic Journal, Royal Economic Society, vol. 119(541), pages F461-F481, November.
  9. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
  10. Balcer, Yves & Sadka, Efraim, 1986. "Equivalence scales, horizontal equity and optimal taxation under utilitarianism," Journal of Public Economics, Elsevier, vol. 29(1), pages 79-97, February.
  11. Alan L. Gustman & Thomas L. Steinmeier, 1983. "A Structural Retirement Model," NBER Working Papers 1237, National Bureau of Economic Research, Inc.
  12. John Muellbauer & Justin van de Ven, 2004. "Estimating Equivalence Scales for Tax and Benefits Systems," Economics Papers 2004-W06, Economics Group, Nuffield College, University of Oxford.
  13. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2003. "Optimal Defaults," American Economic Review, American Economic Association, vol. 93(2), pages 180-185, May.
  14. Alan L. Gustman & Thomas L. Steinmeier, 2002. "The Social Security Early Entitlement Age in a Structural Model of Retirement and Wealth," NBER Working Papers 9183, National Bureau of Economic Research, Inc.
  15. repec:nsr:niesrd:332 is not listed on IDEAS
  16. James Sefton & Justin van de Ven, 2004. "Simulating Household Savings and Labour Supply: an Application of Dynamic Programming," National Institute Economic Review, National Institute of Economic and Social Research, vol. 188(1), pages 56-72, April.
  17. Nagatani, Keizo, 1972. "Life Cycle Saving: Theory and Fact," American Economic Review, American Economic Association, vol. 62(3), pages 344-53, June.
  18. Dr Justin van de Ven, 2004. "Estimating Equivalence Scales for Tax and Benefits Systems," NIESR Discussion Papers 113, National Institute of Economic and Social Research.
  19. Dr Justin van de Ven, 2009. "Optimal Design of Means Tested Retirement Benefits," NIESR Discussion Papers 2272, National Institute of Economic and Social Research.
  20. James Sefton & Justin vandeVen & Martin Weale, 2008. "Means Testing Retirement Benefits: fostering equity or discouraging savings?," Economic Journal, Royal Economic Society, vol. 118(528), pages 556-590, 04.
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Cited by:
  1. Justin van de Ven & Paolo Lucchino, 2013. "Empirical Analysis of Household Savings Decisions in Context of Uncertainty: A Cross-Sectional Approach," Melbourne Institute Working Paper Series wp2013n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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