A structural dynamic microsimulation model of household savings and labour supply

A structural model of the household is described that represents current best-practice in the analysis of savings and labour supply responses to the policy environment. Care has been taken in specifying the model so that it represents an appropriate basis for the analysis of incentive effects to policy change, and for exploring the empirical support for alternative structural assumptions. Matching the model to survey data for the UK reveals some interesting puzzles in relation to the timing of retirement.

Research highlights► A model that represents current best practice in the analysis of savings and labour supply behaviour is described. ► The model is designed to explore the incentives of fiscal policy reform. ► Calibration of model parameters is discussed. ► The model is shown to obtain a close fit to survey data. ► The calibration suggests a role for habits in the assumed preference structure.