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Heterogeneous Labour Markets in a Microsimulation-AGE Model: Application to Welfare Reform in Germany

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  • Boeters, Stefan
  • Feil, Michael

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 a¤ect only the target group. Spillovers to and feedback from other segments of the labour market are unavoidable and may counteract the direct e¤ects 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 _x0087_exible representation of substitution possibilities and di¤erent wage-forming regimes. We look at a stylised reform and _x0085_nd the pattern of labour demand-elasticities to be the main driver of the results. The consequences of the switch from wage bargaining to competitive wage formation for high-skilled workers are concentrated on this very skill group.

Suggested Citation

  • Boeters, Stefan & Feil, Michael, 2008. "Heterogeneous Labour Markets in a Microsimulation-AGE Model: Application to Welfare Reform in Germany," Conference papers 331751, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331751
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    References listed on IDEAS

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    1. Mark Horridge & Glyn Wittwer, 2007. "The economic impacts of a construction project, using SinoTERM, a multi-regional CGE model of China," Centre of Policy Studies/IMPACT Centre Working Papers g-164, Victoria University, Centre of Policy Studies/IMPACT Centre.
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