Equilibrium policy simulation with random utility models of labor supply

Author

Publication Date

Apr 2012

Abstract

Many microeconometric models of discrete labor supply include alternative-specific constants meant to account for (possibly besides other factors) the density or accessibility of particular types of jobs (e.g. part-time jobs vs. full-time jobs). The most common use of these models is the simulation of tax-transfer reforms. The simulation is usually interpreted as a comparative static exercise, i.e. the comparison of different equilibria induced by different policy regimes. The simulation procedure, however, typically keeps fixed the estimated alternative-specific constants. In this note we argue that this procedure is not consistent with the comparative statics

Publication type

EUROMOD Working Paper Series

Series Number

EM5/12

Research areas

Population changes and labour market dynamics, Tax and benefit systems

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