IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v25y2008i3p422-439.html
   My bibliography  Save this article

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

Author

Listed:
  • Arntz, Melanie
  • Boeters, Stefan
  • Gürtzgen, Nicole
  • Schubert, Stefanie

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.

Suggested Citation

  • Arntz, Melanie & Boeters, Stefan & Gürtzgen, Nicole & Schubert, Stefanie, 2008. "Analysing welfare reform in a microsimulation-AGE model: The value of disaggregation," Economic Modelling, Elsevier, vol. 25(3), pages 422-439, May.
    • Handle: RePEc:eee:ecmode:v:25:y:2008:i:3:p:422-439
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264-9993(07)00091-0
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stefan Boeters & Michael Feil & Nicole Gürtzgen, 2007. "Discrete Working Time Choice in an Applied General Equilibrium Model," Computational Economics, Springer;Society for Computational Economics, vol. 29(3), pages 427-427, May.
    2. Cororaton, Caesar B., 2003. "Analyzing the Impact of Philippine Tariff Reform on Unemployment, Distribution and Poverty Using CGE-Microsimulation Approach," Discussion Papers DP 2003-15, Philippine Institute for Development Studies.
    3. John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis," CSAE Working Paper Series 2002-11, Centre for the Study of African Economies, University of Oxford.
    4. 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.
    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.
    6. John Creedy & Guyonne Kalb, 2005. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 697-734, December.
    7. N/A, 1985. "General Policy," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 74-79, January.
    8. Müller, Tobias, 2004. "Evaluating the economic effects of income security reforms in Switzerland: an integrated microsimulation - computable general equilibrium approach," MPRA Paper 111919, University Library of Munich, Germany.
    9. Boeters Stefan & Gürtzgen Nicole & Schnabel Reinhold, 2006. "Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis," German Economic Review, De Gruyter, vol. 7(4), pages 363-388, December.
    10. 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.
    11. 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, number 9780226036335.
    12. 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.
    13. 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," Discussion Papers 367, Statistics Norway, Research Department.
    14. 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 1007-1051, September.
    15. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, October.
    16. 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.
    17. 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.
    18. Snower, Dennis J., 1994. "The Simple Economics of Benefit Transfers," CEPR Discussion Papers 1086, C.E.P.R. Discussion Papers.
    19. Olivier Bargain, 2004. "On modeling household labor supply with taxation," DELTA Working Papers 2004-14, DELTA (Ecole normale supérieure).
    20. John Hutton & Anna Ruocco, 1999. "Tax Reform and Employment in Europe," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 263-287, August.
    21. Bohringer, Christoph & Boeters, Stefan & Feil, Michael, 2005. "Taxation and unemployment: an applied general equilibrium approach," Economic Modelling, Elsevier, vol. 22(1), pages 81-108, January.
    22. N/A, 1985. "General Policy," India Quarterly: A Journal of International Affairs, , vol. 41(1), pages 112-117, January.
    23. 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.
    24. 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.
    25. Cororaton, Caesar B. & Cockburn, John, 2007. "Trade reform and poverty--Lessons from the Philippines: A CGE-microsimulation analysis," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 141-163.
    26. repec:bla:germec:v:7:y:2006:i::p:363-388 is not listed on IDEAS
    27. Boeters, Stefan & Böhringer, Christoph & Feil, Michael, 2002. "Taxation and unemployment: an applied general equilibrium approach for Germany," ZEW Discussion Papers 02-39, ZEW - Leibniz Centre for European Economic Research.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Melanie Arntz & Stefan Boeters & Nicole Gürtzgen & Stefanie Schubert, 2006. "Analysing Welfare Reform in a Microsimulation-AGE Model," Computing in Economics and Finance 2006 109, Society for Computational Economics.
    2. 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.
    3. Stefan Boeters & Michael Feil, 2009. "Heterogeneous Labour Markets in a Microsimulation–AGE Model: Application to Welfare Reform in Germany," Computational Economics, Springer;Society for Computational Economics, vol. 33(4), pages 305-335, May.
    4. Peichl, Andreas, 2008. "The benefits of linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 08-6, University of Cologne, FiFo Institute for Public Economics.
    5. Stefan Boeters & Michael Feil & Nicole Gürtzgen, 2007. "Discrete Working Time Choice in an Applied General Equilibrium Model," Computational Economics, Springer;Society for Computational Economics, vol. 29(3), pages 427-427, May.
    6. Acar, Mustafa & Alpay, Savaş & Bakimli, Esat & Koc, Zehra Zümrüt, 2008. "South – East Asian Integration in the Context of OIC: Implications of Free Trade Among Malaysia, Indonesia and Bangladesh," Conference papers 331755, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Peichl, Andreas, 2005. "Die Evaluation von Steuerreformen durch Simulationsmodelle," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 05-1, University of Cologne, FiFo Institute for Public Economics.
    8. Andreas Peichl, 2009. "The Benefits and Problems of Linking Micro and Macro Models — Evidence from a Flat Tax Analysis," Journal of Applied Economics, Taylor & Francis Journals, vol. 12(2), pages 301-329, November.
    9. Boeters, Stefan & Savard, Luc, 2011. "The labour market in CGE models," ZEW Discussion Papers 11-079, ZEW - Leibniz Centre for European Economic Research.
    10. Boeters, Stefan & Savard, Luc, 2013. "The Labor Market in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 1645-1718, Elsevier.
    11. Bohringer, Christoph & Boeters, Stefan & Feil, Michael, 2005. "Taxation and unemployment: an applied general equilibrium approach," Economic Modelling, Elsevier, vol. 22(1), pages 81-108, January.
    12. Stefan Boeters, 2013. "Optimal Tax Progressivity in Unionised Labour Markets: Simulation Results for Germany," Computational Economics, Springer;Society for Computational Economics, vol. 41(4), pages 447-474, April.
    13. Clauss, Markus & Schubert, Stefanie, 2009. "The ZEW combined microsimulation-CGE model: innovative tool for applied policy analysis," ZEW Discussion Papers 09-062, ZEW - Leibniz Centre for European Economic Research.
    14. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    15. Stefan Boeters & Nicole Gürtzgen & Reinhold Schnabel, 2006. "Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis," German Economic Review, Verein für Socialpolitik, vol. 7(4), pages 363-388, November.
    16. Tracy Foertsch, 2004. "Macroeconomic Impacts of Stylized Tax Cuts in an Intertemporal Computable General Equilibrium Model: Technical Paper 2004-11," Working Papers 15914, Congressional Budget Office.
    17. Stefan Boeters & Christoph Bohringer & Thiess Buttner & Margit Kraus, 2010. "Economic effects of VAT reforms in Germany," Applied Economics, Taylor & Francis Journals, vol. 42(17), pages 2165-2182.
    18. Thomas W. Hertel & Jeffrey J. Reimer, 2006. "Predicting the Poverty Impacts of Trade Reform," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
    19. Clemente Polo Andrés & Raimundo Viejo Rubio, 2011. "Efectos de aumentar las pensiones no contributivas de jubilación y las pensiones con complemento a mínimo de jubilación y viudedad a las personas mayores en España," Hacienda Pública Española / Review of Public Economics, IEF, vol. 196(1), pages 79-106, january.
    20. McKibbin, Warwick J. & Wilcoxen, Peter J., 1998. "The theoretical and empirical structure of the G-Cubed model," Economic Modelling, Elsevier, vol. 16(1), pages 123-148, January.

    More about this item

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:25:y:2008:i:3:p:422-439. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.