Modelling the dynamic effects of transfer policy through the life-course: the LINDA policy analysis tool

Publication date: 29 Nov 2013 | Publication type: Other | Theme: Trade, Investment & Productivity | NIESR Author(s): Van de Ven, J | JEL Classification: C51, C61, C63, H31 | Journal: HMT Working Paper

This paper describes a structural dynamic microsimulation model that generates individualspecific data over a range of demographic and economic characteristics at annual intervals over the life-course. The model is specifically designed to analyse the distributional implications of policy alternatives in terms of their bearing on income and consumption measured over alternative time periods, from one year up to the entire life-course. This focus on economic characteristics measured over appreciable periods of life motivates endogenous simulation of savings and labour supply decisions, taking explicit account of uncertainty regarding the evolving decision environment.In contrast to the existing literature of savings in context of uncertainty, the model described here takes an overlapping generations for which we argue is better adapted to the needs of policy makers and has distinct advantages for empirical investigations.

Keyword tags: 
dynamic programming
labor supply