Stefanie Schubert

Analysing welfare reform in a microsimulation-AGE model: The value of disaggregation

We present a fully integrated microsimulation-AGE model that uses the labour market model PACE-L and data from the German Socio-Economic Panel. We use the model to analyse reform proposals designed to encourage labour force participation at the lower end of the wage distribution. A special focus of this paper is on comparing the fully disaggregated version of the model with more aggregated ones in order to pin down in which respects disaggregation can actually further our insights, and in which respects aggregation can be justified

Assessing the employment effects of the German welfare reform – an integrated CGE-microsimulation approach

The purpose of this article is to quantify the employment effects of the recent German welfare reform. The key element of this reform was to merge the coexisting transfer systems Social Assistance (SA) and Unemployment Assistance (UA) into one unified benefit (Arbeitslosengeld II – ALG II). We also consider a second reform scenario that is intended to further improve the labour supply incentives of low-skilled workers. Our methodological contribution is to use an integrated CGE-microsimulation model. In adopting such an approach, we are able to combine the advantages of microsimulation studies by accounting for the large amount of heterogeneity in terms of households’ preferences and budget constraints with the advantages of an applied general equilibrium model. The latter permits us to identify potential general equilibrium repercussions through changes in wages and unemployment. The simulations indicate that the introduction of ALG II results in a negligible increase in employment of only 45 000 individuals. In contrast, a cut in benefit levels combined with a decrease in transfer withdrawal is shown to produce somewhat larger employment effects of about 190 000 individuals.

Reducing public health insurance expenditure: a numerical analysis for Germany

In recent decades, Germany’s statutory health insurance expenditure increased drastically. To combat moral hazard, moderate copayments for the purchase of prescription drugs were introduced and increased several times. These measures, however, have been insufficient to buck the steadily increasing tide of Germany’s statutory health care expenditure, making further reforms indispensable. Among a multitude of potential reform proposals, such as a switch to a health premia regime, are two policy options that provide for incentives to limit health care demand: mandatory deductibles and further elevating copayments. By combining an applied general equilibrium (AGE) model with abundant empirical data on heterogeneous household types, this article investigates the economic effects of these two policy options, thereby looking at both the current earnings-related SHI system and a hypothetical health premia regime characterized by per capita premia. As a key outcome, we find that the decrease in expenditure associated with both reform options is too small to induce substantial overall effects, most notably, because both the level of deductibles and the copayment rate are rather moderate in international contexts.