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Structural Labour Supply Models and Microsimulation

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  • Aaberge, Rolf

    (Statistics Norway)

  • Colombino, Ugo

    (University of Turin)

Abstract

The purpose of the paper is to provide a discussion of the various approaches for accounting for labour supply responses in microsimulation models. The paper focuses attention on two methodologies for modelling labour supply: the discrete choice model and the random utility – random opportunities model. The paper then describes approaches to utilising these models for policy simulation in terms of producing and interpreting simulation outcomes, outlining an extensive literature of policy analyses utilising these approach. Labour supply models are not only central for analyzing behavioural labour supply responses but also for identifying optimal tax-benefit systems, given some of the challenges of the theoretical approach. Combining labour supply results with individual and social welfare functions enables the social evaluation of policy simulations. Combining welfare functions and labour supply functions, the paper discusses how to model socially optimal income taxation.

Suggested Citation

  • Aaberge, Rolf & Colombino, Ugo, 2018. "Structural Labour Supply Models and Microsimulation," IZA Discussion Papers 11562, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11562
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    5. Sucha Singh, 2020. "Spatio-temporal changes in the patterns of male and female agricultural labour in Punjab: A geographical analysis," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 10(1), pages 183-193, June.
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    7. Ivica Urban & Martina Pezer, 2018. "Microsimulation of Child Benefits: A Review of Studies," International Journal of Microsimulation, International Microsimulation Association, vol. 11(3), pages 134-169.
    8. Richiardi, Matteo & He, Zhechun, 2020. "Measuring economic insecurity: a simulation approach," Centre for Microsimulation and Policy Analysis Working Paper Series CEMPA2/20, Centre for Microsimulation and Policy Analysis at the Institute for Social and Economic Research.
    9. Edlira Narazania & Ana Agundez Garcia & Michael Christl & Francesco Figari, 2023. "The impact of alternative childcare policies on mothers' employment in selected EU countries," Working Papers 636, ECINEQ, Society for the Study of Economic Inequality.
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    More about this item

    Keywords

    discrete choice; labour supply; behavioural microsimulation; tax reforms;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • D10 - Microeconomics - - Household Behavior - - - General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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