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Aggregating Labour Supply and Feedback Effects in Microsimulation

Author

Listed:
  • John Creedy

    (The University of Melbourne)

  • Alan Duncan

    (University of Nottingham)

Abstract

This paper explores an extention of behavioural microsimulation modelling so that third round effects of a policy change can be simulated. The first round effects relate to fixed hours of work, while second round effects allow for changes in desired hours of work at unchanged wages. Third round effects allow for endogenous changes to the distribution of wage rates resulting from the labour supply responses to tax changes. This is achieved using the concept of an aggregate 'supply response schedule', which identifies the extent to which average labour supply responds to tax changes. This is achieved using the concept of an aggregate labour supply responds to a proportional change in wage rates. The third round effect is obtained after re-running a micro simulation model with a suitable modification to individuials' wage rates. The method is illustrated using the MITTS behavioural microsimulation model.

Suggested Citation

  • John Creedy & Alan Duncan, 2005. "Aggregating Labour Supply and Feedback Effects in Microsimulation," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(3), pages 277-290, September.
    • Handle: RePEc:ozl:journl:v:8:y:2005:i:3:p:277-290
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    References listed on IDEAS

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    More about this item

    Keywords

    Time Allocation and Labor Supply (hours of work; part-time employment; temporary workers; work sharing; absenteeism; quits; work-life balance); General Aggregative Models; Forecasting and Simulation;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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