Population ageing and fiscal sustainability: An integrated micro-macro analysis of required tax changes
Most studies on the economic consequences of ageing rely on Computable General Equilibrium (CGE) models that account for feedback mechanisms through changes in relative prices, tax bases etc. However, since individual labour supply behaviour is considered to be a key element in CGE-analyses of fiscal sustainability problems, the results of these analyses may depend crucially on how the labour supply behaviour is modelled. The current practice of combining a simplified representation of the tax and transfer system with the labour supply behaviour of a few representative agents may render a misleading description of incentives and revenue effects. The purpose of this paper is to demonstrate the importance of using an alternative strategy by integrating a detailed microeconometric model of labour supply, that is sufficiently flexible to capture a large variety of labour supply responses, with a large-scale CGE model. The integrated micro-macro CGE model is employed to explore how endogenous household labour supply behaviour affects and interacts with sustainability problems in Norway. The empirical results suggest that the required increase in the future tax burden is less dramatic when the analysis allows for a flexible representation of the labour supply behaviour. Moreover, by replacing the current progressive tax system with a flat tax system it is found that the pressure on future public finances is significantly reduced.
|Date of creation:||Feb 2004|
|Contact details of provider:|| Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway|
Phone: (+47) 21 09 00 00
Fax: +47 - 62 88 55 95
Web page: http://www.ssb.no/en/
More information through EDIRC
References listed on IDEAS
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.:
- Klette, Tor Jakob, 1999.
"Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 47(4), pages 451-476, December.
- Klette, T.J., 1998. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Memorandum 15/1998, Oslo University, Department of Economics.
- Rolf Aaberge & Ugo Colombino & Steinar Strøm, 2004. "Do more equal slices shrink the cake? An empirical investigation of tax-transfer reform proposals in Italy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(4), pages 767-785, December.
- Aaberge, Rolf & Colombino, Ugo & Strøm, Steinar, 2003. "Do More Equal Slices Shrink the Cake? An Empirical Investigation of Tax-Transfer Reform Proposals in Italy," Memorandum 37/2003, Oslo University, Department of Economics.
- Øystein Thøgersen, 2001. "Reforming social security: assessing the effects of alternative funding strategies," Applied Economics, Taylor & Francis Journals, vol. 33(12), pages 1531-1540.
- Dickens, William T & Lundberg, Shelly J, 1993. "Hours Restrictions and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 169-192, February.
- William T. Dickens & Shelly J. Lundberg, 1985. "Hours Restrictions and Labor Supply," NBER Working Papers 1638, National Bureau of Economic Research, Inc.
- Hans Fehr & Wenche Irén Sterkeby & Øystein Thøgersen, 2003. "Social security reforms and early retirement," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(2), pages 345-361, 05.
- Fehr, Hans & Sterkeby, Wenche I. & Thøgersen, Øystein, 2000. "Social security reforms and early retirement," W.E.P. - Würzburg Economic Papers 24, University of Würzburg, Chair for Monetary Policy and International Economics.
- Fehr, H. & Sterkeby, W.I. & Thogersen, O., 2000. "Social Security Reforms and Early Retirement," Papers 16/00, Norwegian School of Economics and Business Administration-.
- Heckman, James J & Lochner, Lance & Taber, Christopher, 1998. "General-Equilibrium Treatment Effects: A Study of Tuition Policy," American Economic Review, American Economic Association, vol. 88(2), pages 381-386, May.
- James J. Heckman & Lance Lochner & Christopher Taber, 1998. "General Equilibrium Treatment Effects: A Study of Tuition Policy," NBER Working Papers 6426, National Bureau of Economic Research, Inc.
- Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-659, December.
- Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-422, July-Aug..
- Fehr, Hans, 1999. "Welfare Effects of Dynamic Tax Reforms," Beiträge zur Finanzwissenschaft, Mohr Siebeck, Tübingen, edition 1, volume 5, number urn:isbn:9783161470165.
- Bye, Brita, 2002. "Taxation, Unemployment, and Growth: Dynamic Welfare Effects of "Green" Policies," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 1-19, January.
- James J. Heckman, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 136-169 National Bureau of Economic Research, Inc.
- Heckman, James J, 1974. "Effects of Child-Care Programs on Women's Work Effort," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 136-163, Part II, .
- Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September.
- Pablo Antolín & Wim Suyker, 2001. "How Should Norway Respond to Ageing?," OECD Economics Department Working Papers 296, OECD Publishing.
- Ugo Colombino & Steinar Strøm & Rolf Aaberge, 2000. "Labor supply responses and welfare effects from replacing current tax rules by a flat tax: Empirical evidence from Italy, Norway and Sweden," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(4), pages 595-621.
- Holmoy, Erling & Vennemo, Haakon, 1995. "A general equilibrium assessment of a suggested reform in capital income taxation," Journal of Policy Modeling, Elsevier, vol. 17(6), pages 531-556, December.
- Euwals, Rob & van Soest, Arthur, 1999. "Desired and actual labour supply of unmarried men and women in the Netherlands," Labour Economics, Elsevier, vol. 6(1), pages 95-118, March.
- Euwals, R.W. & van Soest, A.H.O., 1996. "Desired and Actual Labour Supply of Unmarried Men and Women in the Netherlands," Discussion Paper 1996-23, Tilburg University, Center for Economic Research.
- Leon Bettendorf & R. Beetsma & P. Broer, 2000. "The Budgetary And Economic Consequences Of Ageing In The Netherlands," Computing in Economics and Finance 2000 372, Society for Computational Economics.
- Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
- James J. Heckrnan, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 491-524 National Bureau of Economic Research, Inc.
- James M. Poterba, 1996. "Tax Policy and the Economy, Volume 10," NBER Books, National Bureau of Economic Research, Inc, number pote96-1, April.
- Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:367. 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: (L MaasÃ¸)
If references are entirely missing, you can add them using this form.