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A Segmented Labour Supply Model Estimation for the Construction of a CGE Microsimulation Model: An Application to the Philippines

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  • D. Boccanfuso
  • L. Savard

Abstract

Labour market analysis is an important element to understand the inequality and poverty within a given population. The literature reveals that the informal sector is characterised by a great deal of flexibility and is exempt from formal market rigidities on the one hand, but on the other hand, this sector can constitute a trap from which it is difficult to exit for workers active in the sector with low wages. In this article, we aim to identify the main characteristics differentiating the labour supply of workers on the informal and formal market in the Philippines while estimating these two labour supplies, capturing discrete choice or changes in employment status. We use these estimates to construct a labour supply model that can serve as an input for a broader macro–microsimulation model applied to the Philippines. The results of the estimation provide relatively intuitive findings, highlighting some differences between the two markets. We also shed some light on this macro–microsimulation modelling framework that is generally opaque, in describing how to construct a microsimulation model with endogenous discrete choice model linked to a computable general equilibrium (CGE) model. JEL Classification : C35, O53, J24, C81, O17

Suggested Citation

  • D. Boccanfuso & L. Savard, 2012. "A Segmented Labour Supply Model Estimation for the Construction of a CGE Microsimulation Model: An Application to the Philippines," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(2), pages 211-234, May.
    • Handle: RePEc:sae:mareco:v:6:y:2012:i:2:p:211-234
    DOI: 10.1177/097380101200600206
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    2. Tabitha Mwangi, & Florence Nelima Simiyu & Lulit Mitik Beyene & Albert Onderi, 2017. "The effects of minimum wages on the labor market and income distribution in Kenya: A CGE analysis," Working Papers MPIA 2017-22, PEP-MPIA.

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    More about this item

    Keywords

    Labour Supply; Informal Sector; Microsimulation; Discrete Choice Model; Philippines;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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