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On linking microsimulation and applied GE by exact aggregation of heterogeneous discrete-choice making agents

Author

Listed:
  • Riccardo Magnani

    (Université de Cergy-Pontoise (Théma))

  • Jean Mercenier

    (Université de Cergy-Pontoise (Théma))

Abstract

Our paper contributes to bridge the gap between the microsimulation’s approach and applied GE models, by making use of exact aggregation results from the discrete choice literature: heterogeneous individuals choosing (possibly continuous amounts) within a set of discrete alternatives may be aggregated into a representative agent with CES/CET preferences/technologies. These results therefore provide a natural link between the two policy evaluation approaches. We illustrate the usefulness of these results by evaluating potential effects of population ageing on the dynamics of income distribution and inequalities, using a simple OLG model when individuals have to make leisure/work decisions, and choose a profession among a discrete set of alternatives.

Suggested Citation

  • Riccardo Magnani & Jean Mercenier, 2007. "On linking microsimulation and applied GE by exact aggregation of heterogeneous discrete-choice making agents," THEMA Working Papers 2007-06, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2007-06
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    References listed on IDEAS

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    1. François Bourguignon & Amedeo Spadaro, 2006. "Microsimulation as a tool for evaluating redistribution policies," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 4(1), pages 77-106, April.
    2. Kehoe, Timothy J & Polo, Clemente & Sancho, Ferran, 1995. "An Evaluation of the Performance of an Applied General Equilibrium Model of the Spanish Economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(1), pages 115-141, June.
    3. Luc Savard, 2003. "Poverty and Income Distribution in a CGE-Household Micro-Simulation Model: Top-Down/Bottom Up Approach," Cahiers de recherche 0343, CIRPEE.
    4. Mercenier, Jean & Yeldan, Erinc, 1999. "A Plea For Greater Attention on the Data in Policy Analysis," Journal of Policy Modeling, Elsevier, vol. 21(7), pages 851-873, December.
    5. 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.
    6. Kehoe, Timothy J., 2002. "An Evaluation of the Performance of Applied General Equilibrium Models of the Impact of NAFTA," Conference papers 331066, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. 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.
    8. repec:pse:psecon:2005-02 is not listed on IDEAS
    9. Fougere, Maxime & Mercenier, Jean & Merette, Marcel, 2007. "A sectoral and occupational analysis of population ageing in Canada using a dynamic CGE overlapping generations model," Economic Modelling, Elsevier, vol. 24(4), pages 690-711, July.
    10. Kehoe,Timothy J. & Srinivasan,T. N. & Whalley,John (ed.), 2005. "Frontiers in Applied General Equilibrium Modeling," Cambridge Books, Cambridge University Press, number 9780521825252.
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    Citations

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    Cited by:

    1. Salvador Barrios & Mathias Dolls & Anamaria Maftei & Andreas Peichl & Sara Riscado & Janos Varga & Christian Wittneben, 2019. "Dynamic Scoring Of Tax Reforms In The European Union," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 38(1), pages 239-262, January.
    2. Johannes Bröcker & Jean Mercenier, 2011. "General Equilibrium Models for Transportation Economics," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 2, Edward Elgar Publishing.
    3. Dolls, Mathias & Wittneben, Christian, 2017. "Dynamic Scoring of Tax Reforms in the EU," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168261, Verein für Socialpolitik / German Economic Association.
    4. Colombo, Giulia, 2008. "Linking CGE and Microsimulation Models: A Comparison of Different Approaches," ZEW Discussion Papers 08-054, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Microsimulation; Applied OLG models; Exact aggregation; Discrete choice; Population ageing; Income inequality;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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