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Heterogeneous labour markets in a microsimulation-AGE model: application to welfare reform in Germany

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Author Info
Boeters, Stefan
Feil, Michael

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Abstract

Labour market reforms that are designed to stimulate labour supply at the lower end of the wage distribution can never be precisely restricted to affect only the target group. Spillovers to and feedback from other segments of the labour market are unavoidable and may counteract the direct effects of the reform. An adequate representation of heterogeneous labour markets becomes therefore an important issue for the assessment of reforms. We analyse the possible interactions between labour market segments in a combined, consistent microsimulation-AGE model with a flexible representation of substitution possibilities and different wage-forming regimes. We look at a stylised reform and find labour-demand cross-price elasticities between the low and medium skilled to be the main drivers of the results. Interaction with the high-skilled segment is less pronounced. --

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 08-043 [rev.].

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Date of creation: 2009
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Handle: RePEc:zbw:zewdip:08043r

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Related research
Keywords: Applied general equilibrium model; microsimulation; discrete working time choice; heterogeneous labour markets; labour market reform;

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Find related papers by JEL classification:
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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