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AGGREGATING LABOUR SUPPLY AND FEEDBACK EFFECTS IN MICROSIMULATION

John Creedy and Alan Duncan ()

No 823, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper extends behavioural microsimulation modelling so that third round effects of a policy change can be simulated. The first round effects relate to fixed hours of work, while second round effects allow for changes in desired hours of work at unchanged wages. These allow for endogenous changes to the distribution of wage rates resulting from the labour supply responses to tax changes. This is achieved using the concept of an aggregate 'supply response schedule', which identifies the extent to which average labour supply responds to a proportional change in wage rates. The third round effect is obtained after re-running a microsimulation model with a suitable modification to individuals' wage rates. The method is illustrated using the MITTS behavioural microsimulation model.

Date: 2001
Note: This paper has now been published in: Creedy, J. and Duncan, A. (2005) Aggregating Labour Supply and Feedback Effects in Microsimulation, Australian Journal of Labour Economics, 8, no.3, pp. 277-290.
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Related works:
Journal Article: Aggregating Labour Supply and Feedback Effects in Microsimulation (2005)
Working Paper: Aggregating Labour Supply and Feedback Effects in Microsimulation (2001) Downloads
Working Paper: Aggregating labour supply and feedback effects in microsimulation (2001) Downloads
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