Modelling Welfare State Reform

In: Contributions to Economic Analysis

Abstract

In order to analyze the economic effects of various policy proposals for reforming the welfare state a model has been developed called MIMIC. The structure of this model is presented in the first part of this book. The model combines various modern labour market theories with a detailed description of relevant labour market institutions in an applied general equilibrium context. The second part of the volume contains an elaborate presentation of the simulation results of MIMIC, such as various tax policies, a reduction in benefits or the official minimum wage, individualization of the tax and social security system and the introduction of negative income tax. The model has proved to be a unique instrument for policy evaluation for the Netherlands.