Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192349 
Year of Publication: 
2004
Series/Report no.: 
Discussion Papers No. 367
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Most studies on the economic consequences of ageing rely on Computable General Equilibrium (CGE) models that account for feedback mechanisms through changes in relative prices, tax bases etc. However, since individual labour supply behaviour is considered to be a key element in CGE-analyses of fiscal sustainability problems, the results of these analyses may depend crucially on how the labour supply behaviour is modelled. The current practice of combining a simplified representation of the tax and transfer system with the labour supply behaviour of a few representative agents may render a misleading description of incentives and revenue effects. The purpose of this paper is to demonstrate the importance of using an alternative strategy by integrating a detailed microeconometric model of labour supply, that is sufficiently flexible to capture a large variety of labour supply responses, with a large-scale CGE model. The integrated micro-macro CGE model is employed to explore how endogenous household labour supply behaviour affects and interacts with sustainability problems in Norway. The empirical results suggest that the required increase in the future tax burden is less dramatic when the analysis allows for a flexible representation of the labour supply behaviour. Moreover, by replacing the current progressive tax system with a flat tax system it is found that the pressure on future public finances is significantly reduced.
Subjects: 
Population Ageing
Fiscal Sustainability
Labour Supply
Computable General Equilibrium
JEL: 
D58
H31
H50
J22
Document Type: 
Working Paper

Files in This Item:
File
Size
889.37 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.