The Benefits and Problems of Linking Micro and Macro Models — Evidence from a Flat Tax Analysis

Peichl, Andreas

doi:10.1016/s1514-0326(09)60017-9

Cited by 29 publications

(9 citation statements)

References 29 publications

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“…We also see several advantages of our approach compared to alternative methods of incorporating labor demand e¤ects in labor supply estimations, such as computable general equilibrium (CGE) models (see Peichl (2009) for an overview) or models integrating demand side restrictions via probabilities (cf. Blundell et al (1987)).…”

Section: Introductionmentioning

confidence: 99%

Accounting for labor demand effects in structural labor supply models

Peichl

Siegloch

2012

Labour Economics

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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. www.econstor.eu 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 SIZA 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.IZA Discussion Paper No. 5350 November 2010 ABSTRACT Accounting for Labor Demand Effects in Structural Labor Supply Models *When assessing the effects of policy reforms on the labor market, most studies only focus on labor supply. The interaction of supply and demand side is not explicitly modeled, which might lead to biased estimates of potential labor market outcomes. This paper proposes a straightforward method to remedy this shortcoming. We use information on firms' labor demand behavior and feed them into a structural labor supply model, completing the partial analysis of the labor market on the microdata level. We show the performance and relevance of our extension by introducing a pure labor supply side reform, the workfare concept, in Germany and simulating the labor market outcome of the reform. We find that demand effects offset about 25 percent of the positive labor supply effect of the policy reform.JEL Classification: J22, J23, J68

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Section: Introductionmentioning

confidence: 99%

Accounting for labor demand effects in structural labor supply models

Peichl

Siegloch

2012

Labour Economics

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“…This implies that we abstract both from potential moral hazard of national governments and administrations which could have adverse labor market e¤ects as well as from potential growth-enhancing e¤ects of an EMU-UI scheme. Accounting for these macroeconomic feedback e¤ects would require to link our micro data to a macro-econometric simulation model (Peichl 2009). Second, we do not simulate changes in government behavior or individual behavioral responses, e.g.…”

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An Unemployment Insurance Scheme for the Euro Area? A Comparison of Different Alternatives Using Micro Data

et al. 2014

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This is the first paper that assesses the importance of different stabilization channels of an unemployment insurance system for the euro area (EA). We provide insights on the potential added value of common unemployment insurance (UI) as a fiscal risk sharing device which crucially hinges on its ability to provide interregional smoothing. Running counterfactual simulations based on micro data for the period 2000-13, we found that 10 percent of the income fluctuations due to transitions into and out of un-employment would have been cushioned through inter-regional smoothing at EA-level. Smoothing gains are unevenly distributed across countries, ranging from -5 percent in Malta to 22 percent in Latvia. Our results suggest that the inter-regional smoothing potential is as important as intertemporal smoothing through debt. We found that four member states would have been either a permanent net contributor or net recipient. Contingent benefits could limit the degree of cross-country redistribution, but might reduce desired insurance effects. We also study heterogeneous effects within countries and discuss moral hazard issues at the level of individuals, the administration and economic policy.JEL Codes: F55, H23, J65

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“…We suggest two contrasting scenarios 1 To the best of our knowledge, this is the …rst empirical study linking output changes to distributional and …scal consequences using a detailed micro model of labor-demand responses. The approach is conceptually related to the literature on linking micro and macro models (see, e.g., Bourguignon et al (2003) or Peichl (2009) for a survey, and Bourguignon et al (2008), Hérault (2010), Ahmed & O'Donoghue (2010), Ferreira et al (2008) and Robilliard et al (2008) for distributional and crisis-related analyses). In particular, our method is closer to the "top-down"approach which aims to approximate the e¤ect of macro changes on income distribution.…”

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confidence: 99%

Distributional consequences of labor-demand shocks: the 2008–2009 recession in Germany

Bargain¹,

Immervoll

Peichl

et al. 2011

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 distributional consequences of the recent economic crisis are still broadly unknown. While it is possible to speculate which groups are likely to be hardest-hit, detailed distributional studies are still largely backward-looking due to a lack of real-time microdata. This paper studies the distributional and fiscal implications of output changes in Germany 2008-09, using data available prior to the economic downturn. We first estimate labor demand on 12 years of detailed, administrative matched employer-employee data. The distributional analysis is then conducted by transposing predicted employment effects of actual output shocks to household-level microdata. A scenario in which labor demand adjustments occur at the intensive margin (hour changes), close to the German experience, shows less severe effects on income distribution compared to a situation where adjustments take place through massive layoffs. Adjustments at the intensive margin are also preferable from a fiscal point of view. In this context we discuss the cushioning effect of the tax-benefit system and the conditions under which German-style work-sharing policies can be successful in other countries. Terms of use: Documents inJEL-Code: D580, J230, H240, H600.

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The Benefits and Problems of Linking Micro and Macro Models — Evidence from a Flat Tax Analysis

Cited by 29 publications

References 29 publications

Accounting for labor demand effects in structural labor supply models

Accounting for labor demand effects in structural labor supply models

An Unemployment Insurance Scheme for the Euro Area? A Comparison of Different Alternatives Using Micro Data

Distributional consequences of labor-demand shocks: the 2008–2009 recession in Germany

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