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Alternative Approaches to Discrete Working Time Choice in an AGE Framework

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  • Arntz, Melanie
  • Boeters, Stefan
  • Gürtzgen, Nicole

Abstract

We compare two options of integrating discrete working time choice of heterogenous households into a general equilibrium model. The first, known from the literature, produces household heterogeneity through a working time preference parameter. We contrast this with a model that directly incorporates a logit discrete-choice approach into a AGE framework. On the grounds of both calibration consistency and adequate accomodation of within-household interaction, we argue that the logit approach is preferable. --

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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 05-62.

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Date of creation: 2005
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Handle: RePEc:zbw:zewdip:4545

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Keywords: applied general equilibrium; discrete working time choice; labour market; wage bargaining; labour market reform; logit model;

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  1. Stefan Boeters & Reinhold Schnabel & Nicole Gürtzgen, 2006. "Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 7, pages 363-388, November.
  2. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2005. "Welfare Reform in European Countries: A Microsimulation Analysis," OECD Social, Employment and Migration Working Papers 28, OECD Publishing.
  3. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521766555.
  4. Boeters, Stefan & Böhringer, Christoph & Feil, Michael, 2002. "Taxation and unemployment: an applied general equilibrium approach for Germany," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 02-39, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. R. Aaberge & U. Colombino & T. Wennemo, 2009. "Evaluating Alternative Representations Of The Choice Sets In Models Of Labor Supply," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 23(3), pages 586-612, 07.
  6. 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.
  7. John Hutton & Anna Ruocco, 1999. "Tax Reform and Employment in Europe," International Tax and Public Finance, Springer, Springer, vol. 6(3), pages 263-287, August.
  8. Bovenberg, A Lans & de Mooij, Ruud A & Graafland, Johan J, 1998. "Tax Reform and the Dutch Labour Market: An Applied General Equilibrium Approach," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1983, C.E.P.R. Discussion Papers.
  9. Nickell, S.J. & Ours, J.C. van, 1999. "The Netherlands and the United Kingdom: A European Unemployment Miracle?," Discussion Paper, Tilburg University, Center for Economic Research 1999-119, Tilburg University, Center for Economic Research.
  10. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  11. Gürtzgen, Nicole & Feil, Michael & Boeters, Stefan, 2004. "Discrete Working Time Choice in an Applied General Equilibrium Model," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 04-20, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  13. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "Introduction to "A General Equilibrium Model for Tax Policy Evaluation"," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 1-5 National Bureau of Economic Research, Inc.
  14. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226036335.
  15. 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, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY wp06_04, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  16. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, Elsevier, vol. 3(1), pages 65-80, August.
  17. Henrik Jacobsen Kleven & Claus Thustrup Kreiner, 2003. "The Marginal Cost of Public Funds in OECD Countries. Hours of Work Versus Labor Force Participation," CESifo Working Paper Series 935, CESifo Group Munich.
  18. Graafland, Johan J. & de Mooij, Ruud A., 1999. "Fiscal policy and the labour market: An AGE analysis," Economic Modelling, Elsevier, Elsevier, vol. 16(2), pages 189-219, April.
  19. Jacobebbinghaus, Peter & Steiner, Viktor, 2003. "Reforming Social Welfare as We Know It? A Microsimulation Study for Germany," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 03-33, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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Citations

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Cited by:
  1. Stefan Boeters & Michael Feil, 2009. "Heterogeneous Labour Markets in a Microsimulation–AGE Model: Application to Welfare Reform in Germany," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 33(4), pages 305-335, May.
  2. Melanie Arntz, 2010. "What Attracts Human Capital? Understanding the Skill Composition of Interregional Job Matches in Germany," Regional Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 44(4), pages 423-441.
  3. Magnani, Riccardo & Mercenier, Jean, 2009. "On linking microsimulation and computable general equilibrium models using exact aggregation of heterogeneous discrete-choice making agents," Economic Modelling, Elsevier, Elsevier, vol. 26(3), pages 560-570, May.
  4. Arntz, Melanie & Boeters, Stefan & Gürtzgen, Nicole & Schubert, Stefanie, 2006. "Analysing welfare reform in a microsimulation-AGE model: the value of disaggregation," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 06-76, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Peichl, Andreas, 2009. "Benefits and problems of linking micro and macro models - evidence from a flat tax analysis," ISER Working Paper Series 2009-02, Institute for Social and Economic Research.
  6. Alho, Kari O. E., 2006. "Labour Market Institutions and the Effectiveness of Tax and Benefit Policies in Enchancing Employment: A General Equilibrium Analysis," Discussion Papers, The Research Institute of the Finnish Economy 1008, The Research Institute of the Finnish Economy.
  7. Melanie Arntz & Stefan Boeters & Nicole Gürtzgen & Stefanie Schubert, 2006. "Analysing Welfare Reform in a Microsimulation-AGE Model," Computing in Economics and Finance 2006, Society for Computational Economics 109, Society for Computational Economics.
  8. Peichl, Andreas, 2008. "The Benefits of Linking CGE and Microsimulation Models: Evidence from a Flat Tax Analysis," IZA Discussion Papers 3715, Institute for the Study of Labor (IZA).

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