Abstract

DECALUWE, Bernard; LEMELIN, André  and  BAHAN, David. Endogenous Supply of Labour in a bi-regional MEGC. Inv. Econ [online]. 2006, vol.65, n.258, pp.85-127. ISSN 0185-1667.

A paper that deals with the most relevant innovations of the bi-regional multisectoral computable general equilibrium model (cgem) of Quebec and the rest of Canada, elaborated by the authors for the Ministry of Finance of the province of Quebec. The innovations stressed in the paper include households' endogenous labour supply, the use of effective rates of marginal taxation (TEMI) and partial mobility of capital. The endogenous supply of labour includes free time in the households' Stone-Geary utility functions. In order to avoid non-negligible cross-elasticity prices, a Coloc specification has been formulated. As a result, a model in which a demand for consumption goods similar to that of a linear expenditure system is obtained, while each category of household's labour supply is independent from the wage rate of the other categories of households. On the other hand, the TEMI approach is applied to capital income with a view to calibrating the "fiscal wedge" between capital owners' income and the value of the marginal product. The introduction of TEMI turns out to be interesting when capital is mobile across different industries. We assume partial mobility of capital across both different industries and regions. Furthermore, we also assume some degree of international capital mobility in terms of a function with a constant price-elasticity. Our simulations yield results which show that the model behaves according to economic theory.

        · abstract in Spanish     · text in Spanish     · Spanish ( pdf )