Evaluating gender impacts in employment: A CGE framework for policy makers

Detailed representation of industries and regions has underpinned the policy relevance and hence the success of many CGE models developed over the last four decades, including the VU, TERM, VURM and USAGE models of the Centre of Policy Studies, and the GTAP model. The level of industry detail in these models is rarely matched by significant occupational detail. Although the aggregate supply of labour may be appropriately constrained in these models, a lack of occupational detail gives rise to highly elastic labour supply for individual industries, as the share of labour accounted for by any industry in a detailed industry model is typically small. The problem is addressed in many CGE models (e.g. P.Dixon and Rimmer 2018) by putting constraints around the supply of labour by occupation. The constraint typically involves dividing the labour force into cohorts with fixed characteristics, and using these characteristics to limit occupation-specific labour supply. For example, P.Dixon and Rimmer (2018) use existing occupation and immigration status as the fixed characteristics and use a matrix of transition probabilities to constrain supply to occupations in the model solution. This approach also allows for transition into and out of unemployment.