Income Distribution in Discrete Hours Behavioural Microsimulation Models: An Illustration of the Labour Supply and Distributional Effects of Social Transfers
The distributional implications of an extreme hypothetical reform of the Australian tax-transfer system are examined using the Melbourne Institute Tax and Transfer Simulator. This simulation model predicts labour supply using a probabilistic discrete hours approach. The analysis of the distribution of income is difficult because, even for a small sample with a modest range of labour supply points, the range of possible combinations over the sample is extremely large. This paper demonstrates the use of a pseudo income distribution, where the probability of a particular labour supply value occurring (standardised by the population size) is used to refer to a particular position in the pseudo income distribution. The superior performance of the pseudo approach compared to using the expected income or taking 10 draws from the possible set of distributions is clearly illustrated by the simulation example for sole parents, in which the whole social security system is abolished. The example shows further that even if sole parents could move freely into the labour force, they do not manage to compensate fully for their loss of income when no benefit payments are available.
|Date of creation:||Sep 2003|
|Date of revision:|
|Contact details of provider:|| Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia|
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- M. Keane & R. Moffitt, .
"A structural model of multiple welfare program participation and labor supply,"
Institute for Research on Poverty Discussion Papers
1080-96, University of Wisconsin Institute for Research on Poverty.
- Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-89, August.
- Michael P. Keane & Robert A. Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers 557, Federal Reserve Bank of Minneapolis.
- M. Keane & R. Mofitt, 1995. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," Working Papers 95-4, Brown University, Department of Economics.
- Guyonne Kalb, 2002. "Estimation of Labour Supply Models for Four Separate Groups in the Australian Population," Melbourne Institute Working Paper Series wp2002n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Michael Gerfin & Robert E. Leu, 2003.
"The Impact of In-Work Benefits on Poverty and Household Labour Supply. A simulation study for Switzerland,"
dp0304, Universitaet Bern, Departement Volkswirtschaft.
- Gerfin, Michael & Leu, Robert E., 2003. "The Impact of In-Work Benefits on Poverty and Household Labour Supply: A Simulation Study for Switzerland," IZA Discussion Papers 762, Institute for the Study of Labor (IZA).
- Creedy, John & Duncan, Alan, 2002. " Behavioural Microsimulation with Labour Supply Responses," Journal of Economic Surveys, Wiley Blackwell, vol. 16(1), pages 1-39, February.
- John Creedy & Alan S. Duncan & Mark Harris & Rosanna Scutella, 2002. "Microsimulation Modelling of Taxation and the Labour Market," Books, Edward Elgar Publishing, number 2796.
- Hoynes, Hilary Williamson, 1996.
"Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP,"
Econometric Society, vol. 64(2), pages 295-332, March.
- Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
- Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
- Guyonne Kalb & Rosanna Scutella & Hsein Kew, 2002.
"Estimation of Wage Equations in Australia: Allowing for Censored Observations of Labour Supply,"
Melbourne Institute Working Paper Series
wp2002n26, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Guyonne Kalb & Rosanna Scutella, 2002. "Estimation of Wage Equations in Australia: Allowing for Censored Observations of Labour Supply," Melbourne Institute Working Paper Series wp2002n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2003n23. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Abbey Treloar)
If references are entirely missing, you can add them using this form.