Chapter 10 Population Ageing and Fiscal Sustainability: Integrating Detailed Labour Supply Models with CGE Models

Aaberge, Rolf; Colombino, Ugo; Holmøy, Erling; Strøm, Birger; Wennemo, Tom

doi:10.1016/s1571-0386(06)15010-3

Cited by 12 publications

(14 citation statements)

References 21 publications

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“…Overall, our results paint a less worrying outlook on the fiscal implications of the demographic change. This is line with previous findings on the country level (de Blander et al, 2013;Aaberge et al, 2007).…”

Section: Resultssupporting

confidence: 94%

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Fiscal sustainability and demographic change: a micro-approach for 27 EU countries

Dolls

Doorley²,

Paulus

et al. 2017

Int Tax Public Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E S Fiscal Sustainability andIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. The effect of demographic change on the labor force and on fiscal revenues is topical in light of potential pension shortfalls. This paper evaluates the effect of demographic changes between 2010 and 2030 on labor force participation and government budgets in the EU-27. Our analysis involves the incorporation of population projections, and an explicit modeling of the supply and demand side of the labor market. Our approach overcomes a key shortcoming of most existing studies that focus only on labor supply when assessing the effects of policy reforms. Ignoring wage reactions greatly understates the increase in fiscal revenues, suggesting that fiscal strain from demographic change might be less severe than currently perceived. Finally, as a policy response to demographic change and worsening fiscal budgets, we simulate the increase in the statutory retirement age. Our policy simulations confirm that raising the statutory retirement age can balance fiscal budgets in the long run.JEL Classification: H68, J11, J21

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Section: Resultssupporting

confidence: 94%

“…The complexity of existing tax-benefit system calls for micro-based approaches rather than representative agent models. Notable exceptions are Decoster et al (2014) and de Blander et al (2013) for Belgium and Aaberge et al (2007) for Norway.…”

Section: Introductionmentioning

confidence: 97%

Fiscal sustainability and demographic change: a micro-approach for 27 EU countries

Dolls

Doorley²,

Paulus

et al. 2017

Int Tax Public Finance

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“…Aaberge et al (2007) is an example of the integration between a labour supply microsimulation model and a CGE model in order to assess the fiscal sustainability of the ageing population in Norway. Peichl (2009) uses the same approach to evaluate a flat tax reform in Germany.…”

Section: Macroeconomic Effectsmentioning

confidence: 99%

Microsimulation and Policy Analysis

Figari

Paulus

Sutherland

2015

Handbook of Income Distribution

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ISER Working Paper Series www.iser.essex.ac.uk Microsimulation and Policy AnalysisNon-technical summary This paper is prepared as a chapter forthcoming in the Handbook of Income Distribution, Volume 2 (edited by A. B. Atkinson and F. Bourguignon, Elsevier-North Holland). Microsimulation methods are increasingly used to study the effects of policies on the income distribution contributing both to policy debates and academic literature. In general terms, microsimulation refers to modelling changes in the state or behaviour of micro-level units. We provide an overview of approaches that address questions related to the impact of taxbenefit policies on household income distribution. We first discuss how microsimulation modelling contributes to the analysis of the income distribution more broadly, pointing out that it can enrich survey and administrative data by checking its consistency, adding further details and enhancing analytical flexibility. In addition, it provides the basis for calculating indicators that cannot otherwise be estimated directly from micro-data such as measures of work incentives, net support for children and automatic stabilisers embedded in tax-benefit systems. We then focus more specifically on the role of microsimulation in policy evaluation. Taxbenefit models can provide information on household disposable income and its components under various policy scenarios and as such constitute a unique tool for ex ante policy analysis, though equally can be used for ex post analysis. We review the formal framework underlying such microsimulation-based decomposition analysis of income distribution and suggest a broader perspective to accommodate a wider range of applications. Our main emphasis is on static modelling methods, though we also consider extensions accounting for behavioural reactions and links with macroeconomic models. As microsimulation models are often concerned with current and future policies, we discuss various approaches to predict the income distribution given that data providing information on the current situation becomes available with a time lag, distinguishing between nowcasting and forecasting. We emphasise the role of comparative analysis as cross-country differences in tax-benefit systems and population structures provide a basis to assess the robustness of results and generalise conclusions. We provide empirical illustrations drawing mainly on analysis using the EU-wide tax-benefit model EUROMOD. Covering 27 countries and made generally accessible this is now one of the most widely used models. There are many remaining challenges to providing estimates of the effects of policy and policy changes that can be used with confidence within policy analysis and we consider three major issues: reconciling the simulated income distribution and that measured using the original micro-data; accounting for benefit non take-up and tax non-compliance, as well as validating and assessing the statistical reliability of microsimulation estimates. While our main focus is on the distributio...

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“…The integration of the micro and macro model relies on an iterative approach similar to Aaberge et al (2007) The estimation of consumption demand is based on the Almost Ideal Demand System proposed by Deaton and Muellbauer (1980) and extended by Banks et al (1997) with the introduction of a quadratic income term in the demand functions that fulfils the necessity of having a higher rank demand system (useful when Engel curves are non-linear). Along with the quadratic extension, we also introduce demographic heterogeneity through an income translating function, firstly introduced by Gorman (1976).…”

Section: Rsa Vs Rmi From a Work Incentive Perspectivementioning

confidence: 99%

An ex ante evaluation of the Revenu de Solidarité Active by micro–macro simulation techniques

Piccoli

Spadaro

2015

IZA J Labor Stud

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This paper aims to investigate the effects of the introduction of an active welfare state measure in France, the Revenu de Solidarité Active, which replaced the old system of social minima. By using a micro-macro simulation model, we characterize the effects on households' disposable income, labor supply, wages, GDP, public deficit, and other micro and macroeconomic aspects. Our findings suggest that although increasing public expenditure, the reform largely repays its cost by reducing involuntary unemployment, increasing labor supply and private consumption and thus improves GDP and the deficit/GDP ratio. If the great recession did not occur, poverty and inequality would have been significantly reduced by the RSA reform. JEL codes: I38, C63, C68, J22, H31

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Chapter 10 Population Ageing and Fiscal Sustainability: Integrating Detailed Labour Supply Models with CGE Models

Cited by 12 publications

References 21 publications

Fiscal sustainability and demographic change: a micro-approach for 27 EU countries

Fiscal sustainability and demographic change: a micro-approach for 27 EU countries

Microsimulation and Policy Analysis

An ex ante evaluation of the Revenu de Solidarité Active by micro–macro simulation techniques

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