Microeconomic heterogeneity in wages, hours, and assets to inform an OLG model for New Zealand

Andrew Binning, Susie McKenzie, Murat Özbilgin and Christie Smith ()
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Christie Smith: The Treasury

Treasury Analytical Notes Series from New Zealand Treasury

Abstract: This paper illustrates microeconomic evidence on wages, hours and net worth, which is used to inform the calibration of the overlapping generations (OLG) model under development at the Treasury. Using cross-sectional survey data, we compute quantiles of lifetime profiles for wages, net worth, and hours-worked. Hourly wages are a particularly important input into the OLG model since they affect both productivity and retirement decisions. Our microeconomic evidence is used to characterise five exogenous types of agents with varying productivity levels. These exogenous types approximate the diversity of wage outcomes and wealth levels seen in New Zealand, reflecting high-, low-, and middle-income people. Wage and asset heterogeneity is important in our OLG model to be able to evaluate policies that affect different groups of people differently. For example, a degree of heterogeneity is needed to consider how different tax rates or tax types (such as a capital income or wealth taxes) might affect people with few and many assets or how changes to the universality of superannuation might affect distributional and aggregate outcomes.

JEL-codes: C21 D31 J1 J22 J31 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2025-08-21
New Economics Papers: this item is included in nep-dge
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https://www.treasury.govt.nz/sites/default/files/2025-08/an25-06.pdf

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Persistent link: https://EconPapers.repec.org/RePEc:nzt:nztans:an25/06

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