Analysing Welfare Reform in a Microsimulation-Age Model: The Value of Disaggregation

42 Pages Posted: 28 Nov 2006 Last revised: 26 Aug 2008

See all articles by Melanie Arntz

Melanie Arntz

ZEW – Leibniz Centre for European Economic Research

Stefan Boeters

CPB Netherlands Bureau of Economic Policy Analysis; ZEW – Leibniz Centre for European Economic Research

Nicole Gürtzgen

ZEW – Leibniz Centre for European Economic Research

Stefanie Schubert

WHU - Otto Beisheim School of Management; ZEW – Leibniz Centre for European Economic Research; University of Duisburg-Essen

Date Written: October 2006

Abstract

We present a combined, consistent microsimulation-AGE model that uses the labour market model PACE-L, data from the German Socio-Economic Panel and a discrete choice labour supply estimation. The model is used to analyse a reform that cuts the social assistance minimum income and lowers the transfer withdrawal rate in order to encourage labour force participation at the lower end of the wage distribution. We compare a disaggregated and an aggregated version of the model as well as a partial and a general equilibrium variant. It turns out that both disaggregation and general equilibrium feedback tend to mitigate the labour supply response to the reform proposal. While some labour supply indicators react quite sensitively to the level of aggregation, most macroeconomic variables are considerably more robust.

Keywords: applied general equilibrium, discrete working time choice, labour market, wage bargaining, labour market reform, logit model, microsimulation

JEL Classification: D58, J22, J51

Suggested Citation

Arntz, Melanie and Boeters, Stefan and Guertzgen, Nicole and Schubert, Stefanie, Analysing Welfare Reform in a Microsimulation-Age Model: The Value of Disaggregation (October 2006). ZEW - Centre for European Economic Research Discussion Paper No. 06-076, Available at SSRN: https://ssrn.com/abstract=947678 or http://dx.doi.org/10.2139/ssrn.947678

Melanie Arntz (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Stefan Boeters

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

HOME PAGE: http://www.cpb.nl/eng/general/org/homepages/sbt/

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Nicole Guertzgen

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Stefanie Schubert

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

ZEW – Leibniz Centre for European Economic Research

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

University of Duisburg-Essen

Lotharstrasse 1
Duisburg, 47048
Germany

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