IAB long-term labour market projections and policy simulation with the SYSIFO macroeconometric model

Abstract

"Some model calculations assume a range of growth rates for production and productivity in order to project the long-term development on the labour market. Subsequently the development of the demand for labour is calculated on the basis of these assumptions. This process disregards the dependency of production and productivity on a number of other factors. It also ignores the retroactive repercussions of the projected development on the original variables. A different labour market situation will, for example, give rise to different economic trends, particularly for private consumption and wage definition, which will in turn result in different growth rates for production and productivity. Using interdependent models permits the integration of such feedback into the projections. Basically, the models used may have various origins, such as system theory or neutral networks. The traditional form, however, is the econometric model. There is another application for econometric models in addition to projections - simulations. Unlike research in natural sciences, research in social sciences, such as economics may not run experiments with 'living' objects. Hence, the effects of certain policies (e.g. fiscal policy) cannot be tested in a really existing economy. This is where simulation comes in to replace experiments and permit (tentative) predictions of the effects of certain policies. A simulation of a certain policy is used both ex post and ex ante; ex post for policy evaluation and ex ante to derive recommendations for policy makers. Furthermore simulations may be employed to predict the effects of a changing economic environment (e.g. a devaluation of the German currency). This paper describes the structure and application on the macroeconometric model SYSIFO as used by the IAB." (Author's abstract, IAB-Doku) ((en))

Cite article

Barth, A. (1995): IAB long-term labour market projections and policy simulation with the SYSIFO macroeconometric model. Concept and application. In: IAB Labour Market Research Topics No. 13, p. 1-21.