Aggregating Labour Supply and Feedback Effects in Microsimulation

John Creedy, Alan Duncan

Research output: Contribution to Newspaper/Magazine/BulletinArticle


This paper extends behavioural microsimulation modelling so that third round effects of a policy change can be simulated. The first round effects relate to fixed hours of work, while second round effects allow for changes in desired hours of work at unchanged wages. These allow for endogenous changes to the distribution of wage rates resulting from the labour supply responses to tax changes. This is achieved using the concept of an aggregate ѳupply response scheduleҬ which identifies the extent to which average labour supply responds to a proportional change in wage rates. The third round effect is obtained after re-running a microsimulation model with a suitable modification to individuals' wage rates. The method is illustrated using the MITTS behavioural microsimulation model
Original languageEnglish
Number of pages14
Specialist publicationInstitute for Fiscal Studies. Working Papers (Online)
Publication statusPublished - 2001
Externally publishedYes


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