The Development of a New Zealand Behavioural Microsimulation Model

The objective of this project is to provide a set of programmes that can be used in conjunction with New Zealand Treasury's static microsimulation model (now called TaxMod-A ) to generate behavioural simulations of policy changes. A behavioural simulation model enables simulation of changes in labour supply behaviour after policy reforms that change the financial incentives of employment versus non-employment, and incorporates the expected behavioural changes in the expected government expenditures (for example, in benefit payments) and incomes (for example, in income taxation). The behavioural model proposed in this project description (to be called TaxMod-B ) will be based on the Melbourne Institute Tax and Transfer Simulator for Australia, which in turn is modelled on models from the Institute for Fiscal Studies for the United Kingdom. The use of TaxMod-A output as input in the behavioural model means the development of the behavioural module does not require specific in-depth knowledge of the New Zealand social security system.

Funded by: New Zealand Treasury.

Project leader: Dr Guyonne Kalb

Researchers: Dr Hielke Buddelmeyer and Dr Lixin Cai

The project started in November 2003 and was finished in the middle of 2005. A policy analysis using the model was published:

"Policy Reforms in New Zealand": Chapter 12 in H. Buddelmeyer, J. Creedy and G. Kalb (2007), Tax Policy Design and Behavioural Microsimulation Modelling. Cheltenham: Edward Elgar.

For more information on this project, please contact Guyonne Kalb at [email protected]