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. We present an applied general equilibrium modelling approach to analyse employment and unemployment effects of labour tax cuts in an economy where wages are determined through firm-union bargaining at the sectoral level. In such a labour market regime, simulations for Germany show that labour tax policies can make only a small contribution to alleviating the problem of persistent unemployment. Terms of use: Documents inJEL classification: D58, E62, J60.Keywords: applied general equilibrium, wage bargaining, labour tax policy. We are grateful to a referee of the jounal of the CEER Mannheim for a number of clarifying suggestions. Christoph Boehringer

Applied general equilibrium model, Microsimulation, Discrete working time choice, Heterogeneous labour markets, Labour market reform, D58, J22, J51,

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.

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 integrates microeconomic work based on microsimulation models and macroeconomic experiences with representative agent models. Basically, it is an applied general equilibrium (AGE) model with 26 different household types. Each of them represents a different socioeconomic group. Each person has to decide on the amount of labour supplied to the market. (S)he can choose from a small number of working time options, among them non-participation. The net income associated with each working time option is endogenously determined and depends on flexible producer wages as well as taxes and transfers. This labour supply module is combined with a bargaining setup for wage determination and embedded in a standard AGE model in the tradition of Shoven and Whalley (1984). 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 households.

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