Discrete Working Time Choice in an Applied General Equilibrium Model

Abstract

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp0420.pdf The model is calibrated to German micro and macro data. We then use it to analyse stylised policy reforms that are designed to stimulate labour supply. In the first scenario, the basic social assistance (SA) rate ("Regelsatz") is cut by 50 per cent for all household members (adults and children). In the second scenario, individuals with large child care responsibilities, i.e. single parents with more than one child and women in couple households with more than one child, are exempted from the SA rate cut. In both cases, we report macroeconomic changes as well as effects on the participation rate, average working hours and labour supply for different subsets of Abstract We present a model that integrates the discrete working time choice of heterogenous households into a general equilibrium setting where wages are determined by sectoral bargaining between firms and trade unions. The model is calibrated to German micro and macro data. We then use it to analyse stylised policy reforms that are designed to stimulate labour supply.

Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis

“…In addition, PACE-L incorporates important institutional characteristics of the German labour market, namely union wage bargaining and involuntary unemployment (see Section 3.2). A more technical model description and a summary of the data sources used for calibration can be found in Boeters et al (2005) and Böhringer et al (2005).…”

“…Each positive labour supply may result in 11. Boeters et al (2005) provide a more detailed description of the modelling framework and the underlying calibrations.…”

“…The direct effects can be isolated by keeping wages fixed and tracing the resulting changes of the working-time distribution through 14. For a more detailed description of the wage-bargaining model, see Boeters et al (2005) and Böhringer et al (2005). (2), it can be seen that the supply response depends on the change in the difference between the CES components of the utility function corresponding to different working-time categories.…”

“…We use the CGE model PACE-L, which incorporates important institutional features of the German labour market, most importantly sectoral wage bargaining (Böhringer et al, 2005). The link to microsimulation is established by a detailed representation of the German tax-benefit system and a discrete choice model of labour supply where individuals can choose from a finite set of hours (see also Boeters et al, 2005). Discrete choice models of labour supply have recently become increasingly popular as they provide a more realistic description of supply choices (see e.g.…”

The Impact of Benefit and Tax Reforms on Estonian Labor Market in a General Equilibrium Framework

“…The impact of payroll tax has also been analysed using a developing country model with an informal sector by Fortin et al (1997). To distinguish the impact of tax reforms on different labor groups, models with heterogeneous households which differ in their preferences with respect to labor supply, have been used (see Graafland et al (2001), Boeters et al (2004)).…”