Structural Labour Supply Models and Microsimulation

Rolf Aaberge and Ugo Colombino

No 11562, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: discrete choice; labour supply; behavioural microsimulation; tax reforms (search for similar items in EconPapers)
JEL-codes: C50 D10 D31 H21 H24 H31 J20 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2018-05
New Economics Papers: this item is included in nep-cmp, nep-dcm, nep-lma, nep-pbe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published - revised version published in: International Journal of Microsimulation, 2018, 11 (1), 162 - 197

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Related works:
Journal Article: Structural Labour Supply Models and Microsimulation (2018)
Working Paper: Structural Labour Supply Models and Microsimulation (2018)
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