journal articles

Abstract:

Objectives. Universal Credit (UC) was introduced in the UK in April 2013 in selected areas, marking the beginning of its phased rollout. Previous research identifies acute health harms among unemployed people, but the policy's impacts longer-term and on broader claimant groups remain unknown. This study explored UC effects on population mental health for up to four years post-introduction on a larger cohort of claimants, including employed people.

Study design. Longitudinal study.

Methods. We used data from the UK Household Longitudinal Study between 2009 and 2019 linking 108,247 observations (29,528 working age participants) to administrative UC Local Authority district data. We compared a UC-eligible population – reporting receipt of either UC or any of six legacy benefits (treatment group) – to individuals receiving alternative benefits (comparison group). We used standard and novel difference-in-differences approaches, exploiting geographical variation of UC rollout, and accounting for heterogeneity in treatment timing, to estimate mental health impacts (SF-12 Mental Component Summary) on average and at different time points post-introduction.

Results. UC was associated with mental health declining by 0·70 units (95 % CI -1·24 to −0·15), a 1·5 % relative reduction. Effects were larger during the first year of exposure (−1·01, 95 % CI -1·93 to −0·10) without returning to baseline levels. Between 2013 and 2019, an estimated 111,954 (95 % CI 35,497 to 182,948) additional people experienced depression and/or anxiety after UC's introduction, 27,115 of whom may have reached diagnostic threshold for common mental disorders.

Conclusions. UC led to a sustained deterioration in population mental health, particularly marked in the first year of implementation. Reforms to UC are warranted to mitigate adverse mental health impacts.

Abstract:

We analyse the complex dynamic feedback effects between different life domains over the life course, providing a quantification of the direct (not mediated) and indirect (mediated) effects. To extend the analysis in scope and time beyond the limitations of existing data, we use a rich dynamic microsimulation model of individual life course trajectories parameterised and validated to the UK context. We interpret findings in terms of the implied attenuation or reinforcement mechanisms at play, and discuss implications for health and economic inequalities.

Abstract:

SimPaths is a family of models for individual and household life course events, all sharing common components. The framework is designed to project life histories through time, building up a detailed picture of career paths, family (inter)relations, health, and financial circumstances. It builds upon standardised assumptions and data sources, which facilitates adaptation to alternative countries – versions currently exist for the UK and Italy, and are under development for Hungary, Poland and Greece. Careful attention is paid to model validation, and sensitivity of projections to key assumptions. The modular nature of the SimPaths framework is designed to facilitate analysis of alternative assumptions concerning the tax and benefit system, sensitivity to parameter estimates and alternative approaches for projecting labour/leisure and consumption/savings decisions. Projections for a workhorse model parameterised to the UK context are reported, which closely reflect observed data throughout a validation window between the Financial crisis (2011) and the Covid-19 pandemic (2019).

Abstract:

We study the effects of digital transformation in the EU on individual employment outcomes, wage growth, and income inequality, during the decade 2010-2019. Our results allow us to formulate a “conveyor-belt” hypothesis, whereas digital skills are important for finding a job, but less so for retaining it. The ability of out-of-work individuals with higher digital skills to jump back on the labour market is reduced for those with higher education, suggesting a faster depreciation of their digital skills. A similar effect, although of limited size, is found for earning growth: out-of-work individuals with higher digital skills are not only more likely to find a job, but experience higher earning growth, compared to their peers with lower digital skills. Our results point to a vulnerability of workers “left behind” from the digital transformation and the labour market. The overall effects on inequality are, however, limited.

Abstract:

Economic determinants are important for population health, but actionable evidence of how policies can utilise these pathways remains scarce. This study employs a microsimulation framework to evaluate the effects of taxation and social security policies on population mental health. The UK economic crisis caused by the COVID-19 pandemic provides an informative context involving an economic shock accompanied by one of the strongest discretionary fiscal responses amongst OECD countries.

The analytical setup involves a dynamic, stochastic, discrete-time microsimulation model (SimPaths) projecting changes in psychological distress given predicted economic outcomes from a static tax-benefit microsimulation model (UKMOD) based on different policy scenarios. We contrast projections of psychological distress for the working-age population from 2017 to 2025 given the observed policy environment against a counterfactual scenario where pre-crisis policies remained in place. Levels of psychological distress and potential cases of common mental disorders (CMDs) were assessed with the 12-item General Health Questionnaire (GHQ-12).

The UK policy response to the economic crisis is estimated to have prevented a substantial fall (over 12 percentage points, %pt) in the employment rate in 2020 and 2021. In 2020, projected psychological distress increased substantially (CMD prevalence increase >10%pt) under both the observed and the counterfactual policy scenarios. Through economic pathways, the policy response is estimated to have prevented a further 3.4%pt [95%UI 2.8%pt, 4.0%pt] increase in the prevalence of CMDs, approximately 1.2 million cases. Beyond 2021, as employment levels rapidly recovered, psychological distress returned to the pre-pandemic trend. Sustained preventative effects on poverty are estimated, with projected levels 2.1%pt [95%UI 1.8%pt, 2.5%pt] lower in 2025 than in the absence of the observed policy response.

The study shows that policies protecting employment during an economic crisis are effective in preventing short-term mental health losses and have lasting effects on poverty levels. This preventative effect has substantial public health benefits.

Abstract:

Background. Population mental health in the United Kingdom (UK) has deteriorated, alongside worsening socioeconomic conditions, over the last decade. Policies such as Universal Basic Income (UBI) have been suggested as an alternative economic approach to improve population mental health and reduce health inequalities. UBI may improve mental health (MH), but to our knowledge, no studies have trialled or modelled UBI in whole populations. We aimed to estimate the short-term effects of introducing UBI on mental health in the UK working-age population.

Methods and findings. Adults aged 25 to 64 years were simulated across a 4-year period from 2022 to 2026 with the SimPaths microsimulation model, which models the effects of UK tax/benefit policies on mental health via income, poverty, and employment transitions. Data from the nationally representative UK Household Longitudinal Study were used to generate the simulated population (n = 25,000) and causal effect estimates. Three counterfactual UBI scenarios were modelled from 2023: “Partial” (value equivalent to existing benefits), “Full” (equivalent to the UK Minimum Income Standard), and “Full+” (retaining means-tested benefits for disability, housing, and childcare). Likely common mental disorder (CMD) was measured using the General Health Questionnaire (GHQ-12, score ≥4). Relative and slope indices of inequality were calculated, and outcomes stratified by gender, age, education, and household structure. Simulations were run 1,000 times to generate 95% uncertainty intervals (UIs). Sensitivity analyses relaxed SimPaths assumptions about reduced employment resulting from Full/Full+ UBI.

Partial UBI had little impact on poverty, employment, or mental health. Full UBI scenarios practically eradicated poverty but decreased employment (for Full+ from 78.9% [95% UI 77.9, 79.9] to 74.1% [95% UI 72.6, 75.4]). Full+ UBI increased absolute CMD prevalence by 0.38% (percentage points; 95% UI 0.13, 0.69) in 2023, equivalent to 157,951 additional CMD cases (95% UI 54,036, 286,805); effects were largest for men (0.63% [95% UI 0.31, 1.01]) and those with children (0.64% [95% UI 0.18, 1.14]). In our sensitivity analysis assuming minimal UBI-related employment impacts, CMD prevalence instead fell by 0.27% (95% UI −0.49, −0.05), a reduction of 112,228 cases (95% UI 20,783, 203,673); effects were largest for women (−0.32% [95% UI −0.65, 0.00]), those without children (−0.40% [95% UI −0.68, −0.15]), and those with least education (−0.42% [95% UI −0.97, 0.15]). There was no effect on educational mental health inequalities in any scenario, and effects waned by 2026.

The main limitations of our methods are the model’s short time horizon and focus on pathways from UBI to mental health solely via income, poverty, and employment, as well as the inability to integrate macroeconomic consequences of UBI; future iterations of the model will address these limitations.

Conclusions. UBI has potential to improve short-term population mental health by reducing poverty, particularly for women, but impacts are highly dependent on whether individuals choose to remain in employment following its introduction. Future research modelling additional causal pathways between UBI and mental health would be beneficial.

Abstract:

A Minimum Income Guarantee (MIG) ensures people have a minimum amount of income for essentials such as healthy food, housing, health care, social and digital networks to support health and well-being. MIGs could be a useful tool to reduce inequalities. A MIG will only be effective if those who are eligible take it up. The aim of this paper is to explore how individual characteristics were associated with take-up of a MIG for pensioners (aged 60+ for women and aged 65+ for men) in England. The data used is from the British Household Panel Survey including 9430 observations from 1893 people, from 1999 to 2002. We estimated a random effects logistic regression. Results show that women were less likely to claim than men (OR ranging from 0.17 [95% CI 0.10–0.29]-0.73 [95% CI 0.40–1.34]), and couples were less likely to claim (OR ranging from 0.04 [95% CI 0.03–0.06]-0.01 [95%CI 0.01–0.02]) than single person households. People with better mental health (OR 1.05 95% CI 1.02–1.08), older pensioners (75+) (OR ranging from 1.98 [95% CI 1.52–2.59]-2.81 [95%CI 2.16–3.67]), those who were registered disabled (OR 4.03 95% CI 2.50–6.52), and those with no formal qualification (OR ranging from 1.74 [95%CI 0.93–3.26]-2.07 [95% CI 1.22–3.51]) were more likely to claim. Understanding who is likely to claim MIGs is important to avoid social security policy inadvertently increasing inequalities.

Abstract:

We present a thorough empirical study on real interest rates by also including risk aversion through the introduction of the market price of risk. From the viewpoint of complex systems science and its multidisciplinary approach, we use the theory of bond pricing to study the long-term discount rate to estimate the rate when taking historical US and UK data, and to further contribute to the discussion about the urgency of climate action in the context of environmental economics and stochastic methods. Century-long historical records of 3-month bonds, 10-year bonds, and inflation allow us to estimate real interest rates for the UK and the US. Real interest rates are negative about a third of the time and the real yield curves are inverted more than a third of the time, sometimes by substantial amounts. This rules out most of the standard bond-pricing models, which are designed for nominal rates that are assumed to be positive. We, therefore, use the Ornstein–Uhlenbeck model, which allows negative rates and gives a good match to inversions of the yield curve. We derive the discount function using the method of Fourier transforms and fit it to the historical data. The estimated long-term discount rate is 1.7% for the UK and 2.2% for the US. The value of 1.4% used by Stern is less than a standard deviation from our estimated long-run return rate for the UK, and less than two standard deviations of the estimated value for the US. All of this once more reinforces the need for immediate and substantial spending to combat climate change.

Abstract:

We propose a model-based decomposition method for the aggregate labour share in terms of the first moments of the joint distribution of total factor productivity, market power, wages and prices, and apply it to UK manufacturing using firm-level data for 1998–2014. Contrary to a narrative focussing on increasing disparities between firms, the observed decline in the aggregate labour share over the period is driven entirely by the decline in the labour share of the representative firm, mostly due to an increasing disconnect between average productivity and real wages. Changes in the dispersion of firm-level variables have contributed to slightly contain this decline.

Abstract: 

Background. In high income countries one in fve children still lives in poverty, which is known to adversely shape the life course health trajectory of these children. However, much less is understood on whether social and fiscal policies have the capacity to reverse this damage, which intervention is likely to be most effective and when these interventions should be delivered to maximise their impact. This systematic review attempts to address these questions by looking at the impact of income-support interventions, delivered during the first 1,000 days of life, on cardiovascular, metabolic, respiratory and mental health outcomes.

Methods. The review was restricted to experimental or quasi experimental studies conducted in high income countries. Studies were retrieved from multidisciplinary databases as well as health, economic, social sciences-specific literature browsers. All papers retrieved through the search strategy were double screened at title, abstract and full text stage. Relevant data of the selected studies were extracted and collected in tables, then summarised via narrative synthesis approach. Robustness of findings was assessed by tabulating impact by health outcome, type of intervention and study design.

Results. Overall, 16 relevant papers were identified, including 15 quasi-experimental studies and one randomized control trial (RCT). Income-support interventions included were unconditional/conditional cash transfers, income tax credit and minimum wage salary policies. Most studies were conducted in United States and Canada. Overall, the evidence suggested limited efect on mental health indicators but a positive, albeit small, efect of most policies on birth weight outcomes. Despite this, according to few studies that tried to extrapolate the results into public health terms, the potential number of negative outcomes averted might be consistent.

Conclusions. Income-support interventions can positively afect some of the health outcomes of interest in this review, including birth weight and mental health. Given the large number of people targeted by these programs, one could infer that – despite small – the observed efect may be still relevant at population level. Nonetheless, the limited generalisability of the evidence gathered hampers firm conclusions. For the future, the breadth and scope of this literature need to be broadened to fully exploit the potential of these interventions and understand how their public health impact can be maximised.

Abstract: 

We develop a new methodology to nowcast the effects of the COVID-19 crisis on GDP and forecast its evolution in small, export-oriented countries. To this aim, we exploit variation in financial indexes at the industry level in the early stages of the crisis and relate them to the expected duration of the crisis for each industry, under the assumption that the main shocks to financial prices in 2020 came from COVID-19. Starting from the latest official information available at different stages of the crisis on industry-level trend deviations of GDP, often a few months old, we predict the ensuing recovery trajectories using the most recent financial data available at the time of the prediction. The financial data reflect, among other things, how subsequent waves of infections and information about new vaccines have impacted expectations about the future. We apply our method to Vietnam, one of the most open economies in the world, and obtain predictions that are more optimistic than projections by the International Monetary Fund and other international forecasters, and closer to the realised figures. Our claim is that this better-than-expected performance was visible in stock market data early on but was largely missed by conventional forecasting methods.

Abstract: 

The UK, and other high-income countries, are experiencing substantial increases in living costs. Several overlapping and intersecting economic crises threaten physical and mental health in the immediate and longer term. Policy responses may buffer against the worst effects (e.g. welfare support) or further undermine health (e.g. austerity). We explore fundamental causes underpinning the cost-of-living crisis, examine potential pathways by which the crisis could impact population health and use a case study to model potential impacts of one aspect of the crisis on a specific health outcome. Our modelling illustrates how policy approaches can substantially protect health and avoid exacerbating health inequalities. Targeting support at vulnerable households is likely to protect health most effectively. The current crisis is likely to be the first of many in era of political and climate uncertainty. More refined integrated economic and health modelling has the potential to inform policy integration, or ‘health in all policies’.

Abstract: 

Introduction. Government policies on taxation and social security are important determinants of population health outcomes and health inequalities. However, there is a shortage of evidence to inform policymakers of the health consequences of such policies. The Health Equity and Its Economic Determinants project aims to assess the potential impacts of different taxation and social security policies across Europe on population health and health inequalities using a computer-based simulation that provides projections over multiple health domains.

Methods and analysis. In the first phase, key input parameters for the model will be estimated using estimation techniques that control for the effects of prior exposure on time-varying confounders and mediators (g-methods). The second phase will involve developing and validating the microsimulation model for the UK. Policy proposals, developed with policymakers, will be simulated in the third phase to investigate the impacts of income tax and social security changes on population health and health inequalities. In the final phase, the microsimulation model will be extended across other European countries.

Abstract: 

Introduction. The UK social security system is being transformed by the implementation of Universal Credit (UC), which combines six existing benefits and tax credits into a single payment for low-income households. Despite extensive reports of hardship associated with the introduction of UC, no previous studies have comprehensively evaluated its impact on mental health. Because payments are targeted at low-income households, impacts on mental health will have important consequences for health inequalities.

Methods and analysis. We will conduct a mixed methods study. Work package (WP) 1 will compare health outcomes for new recipients of UC with outcomes for legacy benefit recipients in two large population surveys, using the phased rollout of UC as a natural experiment. We will also analyse the relationship between the proportion of UC claimants in small areas and a composite measure of mental health. WP2 will use data collected by Citizen’s Advice to explore the sociodemographic and health characteristics of people who seek advice when claiming UC and identify features of the claim process that prompt advice-seeking. WP3 will conduct longitudinal in-depth interviews with up to 80 UC claimants in England and Scotland to explore reasons for claiming and experiences of the claim process. Up to 30 staff supporting claimants will also be interviewed. WP4 will use a dynamic microsimulation model to simulate the long-term health impacts of different implementation scenarios. WP5 will undertake cost–consequence analysis of the potential costs and outcomes of introducing UC and cost–benefit analyses of mitigating actions.

Abstract: 

Background. Welfare policies are generally evaluated for their effects on economic outcomes, and not  for their impact on population health. We developed an integrated Microsimulation for Income and Child Health Outcomes (MICHO) model able to forecast the effects of fiscal policies on childhood  health in European Countries, and we focused our study on childhood obesity in Italy.

Methods. MICHO is based on three integrated modules: M1 simulates the effects of fiscal reforms on disposable household income using the tax-benefit microsimulation program EUROMOD; M2 exploits the data of specific birth cohort studies (the NINFEA birth cohort study for Italy) to estimate the effects of income on child Body Mass Index(BMI) at different ages; and M3 use dynamic microsimulation models to combine the population structure and incomes obtained by M1 with the regression model’s specifications and effect sizes from M2, projecting the simulated distribution of BMI according to different policy scenarios. 

Findings. Both universal benefits, such as Universal Basic Income (BI), and targeted interventions, such as Child Benefit (CB) for poorer households, have a strong impact on childhood obesity, reaching a Prevalence Ratio (PR) of 0·67 [95%CI: 0·50-0·83] for the simulated BI and 0·64 [95%CI: 0·44-0·84] for CB in 10-years-old children. Focused interventions are also more efficient than universal ones in terms of marginal benefits.

Interpretation. A wider use of robust microsimulation models to forecast the effects of fiscal policies on health is desirable, and should be considered as one of the instruments needed to reach the Health in All Policies goals.

Abstract: In this paper we introduce UKMOD, a new tax-benefit model for England, Wales, Scotland, Northern Ireland and the whole of the UK. The model originates and replaces as a stand-alone model the UK component of EUROMOD, the tax-benefit model for the European Union member states, which from 2021 is not updated anymore. We describe the main departures from EUROMOD, discuss some key assumptions including data issues, and provide information on the nowcasting and macro-validation procedure applied.

Abstract: We nowcast the economic effects of the Covid-19 pandemic and related lockdown measures in the UK and then analyse the distributional and budgetary effects of the estimated individual income shocks, distinguishing between the effects of automatic stabilisers and those of the emergency policy responses. Under conservative assumptions about the exit strategy and recovery phase, we predict that the rescue package will increase the cost of the crisis for the public budget by an additional £26 billion, totalling over £60 billion. However, it will allow to contain the reduction in the average household disposable income to 1 percentage point, and will reduce poverty rate by 1.1 percentage points (at a constant poverty line), with respect to the pre-Covid situation. We also show that this progressive effect is due to the increased generosity of Universal Credit, which accounts for only 20% of the cost of the rescue package. 

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Abstract: The assessment of early life socioeconomic position (SEP) is essential to the tackling of social inequalities in health. Although di erent indicators capture di erent SEP dimensions, maternal education is often used as the only indicator in birth cohort research, especially in multi-cohort analyses. Household income, as a direct measure of material resources, is one of the most important indicators, but one that is underused because it is di cult to measure through questionnaires. We propose a method to construct a standardized, cross-cohort comparable income indicator, the “Equivalized Household Income Indicator (EHII)”, which measures the equivalized disposable household income, using external data from the pan-European Union Statistics on Income and Living Conditions (EUSILC) surveys, and data from the cohorts. We apply this method to four studies, Piccolipiù and NINFEA from Italy and ELFE and EDEN from France, comparing the distribution of EHII with other SEP-related variables available in the cohorts, and estimating the association between EHII and child body mass index (BMI).We found that basic parental and household characteristics may be used, with a fairly good performance, to predict the household income. We observed a strong correlation between EHII and both the self-reported income, whenever available, and other individual socioeconomic-related variables, and an inverse association with child BMI. EHII could contribute to improving research on social inequalities in health, in particular in the context of European birth cohort collaborative studies.

Abstract: In the 1980s and 1990s the US employment rate increased steadily, and by 2000 it was one of the highest among the rich democratic nations. Since then it has declined both in absolute terms and relative to other countries. We use an in-depth comparison between the United States and the United Kingdom to probe the causes of America's poor recent performance. Contrary to a common narrative, a comparative perspective suggests that the decline in US labour force participation is not confned to the (white) male population; the divergence in the female participation rate is even more pronounced. We do not fnd evidence that the poor US performance is linked to cyclical patterns, such as the 2008–09 Great Recession; instead, it is a more pervasive, longer-run phenomenon. The relative decline of US participation rates compared to the UK is attributable to shifts in socio-demographic characteristics, such as education, and to shifts in the impact of those characteristics, which have become more adverse to participation.

Abstract: Rising income inequality has recently come centre-stage as a core societal concern for rich countries. The diagnosis of the forces driving inequality upwards and their relative importance remains hotly contested, notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices. This survey provides a critical review and synthesis of recent research. The focus is on income inequality across the entire distribution, rather than only on what has been happening at the very top. We pay particular attention to including what has been learned from the analysis of micro-data, to ensuring that the coverage is not unduly US-centric, and to analyses of the interrelations between the different drivers of inequality. The marked differences in inequality trends across countries and time-periods reflect how global economic forces such as globalisation and technological change have interacted with differing national contexts and institutions. Major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades.

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Abstract: We project medium to long term trends in labour force participation and employment for selected low- participation EU countries (Italy, Spain, Ireland, Hungary and Greece), with Sweden as a benchmark, by means of a dynamic microsimulation model. By exploring alternative scenarios to our baseline forecasts and their implications for GDP growth, we find that the gap between male and female participation is mostly explained by (i) differences in the individual conditional behaviour of older female cohorts, (ii) inadequate family policies. In particular, our results show that the conditional behaviour of younger women in the low- participation countries is similar to that in Sweden. In a nutshell, what is needed is not a change of behaviour on the side of women but a change of mentality on the side of institutions and firms. 

Abstract: We project medium to long term trends in labour force participation and employment for selected lowparticipation EU countries (Italy, Spain, Ireland, Hungary and Greece), with Sweden as a benchmark, by means of a dynamic microsimulation model. By 2020, only Sweden will be above the Europe 2020 target of 75% employment rate, though Ireland will be close; the target will be approached by all other countries only at the end of the simulation period at 2050, with the exception of Hungary. Our forecasts, that fully take into account the uncertainty coming from the estimation of all the processes in the microsimulation, significantly depart from the official projections of the European Commission for two of the six countries under analysis.  

Abstract: The main argument of Luzius Meisser’s paper is in the title: “The code is the model”. This is considered as a self-evident truth, that once understood allows to reap the benefits of agile software development. The paper then continues describing some good practices in programming, and advocates the adoption of new editorial policies for simulation-based studies. The paper deals with an important topic, is well written, and engaging. In particular, I agree with most of the recommendations for increasing the replicability of the results and writing simple and accessible code put forward in the paper. However, I think the central claim of the paper suffers from some major misconceptions... 

Abstract: We analyze the heterogeneous employment effects of financial shocks using a rich data set of job contracts, matched with the universe of firms and their lending banks in one Italian region. To isolate the effect of the financial shock we construct a firm-specific time-varying measure of credit supply. The preferred estimate indicates that the average elasticity of employment to a credit supply shock is 0.36. The adjustment has effects both at the extensive and intensive margins and is concentrated among workers with temporary contracts. We also examine heterogeneous effects of the credit crunch by education, age, gender and nationality.

Abstract: This paper estimates the causal relationship of supply of art on domestic tourist flows. To this aim, we use aggregate bilateral data on tourist flows and various data on museums in the twenty Italian regions. To solve the potential endogeneity of the supply of museums, we use three different empirical strategies: we use a fixed effects model controlling for bilateral macro-area dummies, we compute the degree of selection on unobservables relative to observables which would be necessary to drive the result to zero and, finally, we adopt a two-stage least squares approach that uses a measure of historical patronage, the number of noble families, as an instrument for the number of museums. For each empirical strategy, there is strong evidence of a positive effect of the number of ‘net-museums’ on bilateral tourist flows.

Abstract: We introduce JAS-mine, a new Java-based computational platform that features tools to support the development of large-scale, data-driven, discrete-event simulations. JAS-mine is specifically designed for both agent-based and microsimulation modelling, anticipating a convergence between the two approaches. An embedded relational database management system provides tools for sophisticated input-output communications and data storage, allowing the power of relational databases to be used within an object-oriented framework. The JAS-mine philosophy encourages the separation of distinct concepts, objects and functionalities of the simulation model, and advocates and supports transparency, flexibility and modularity in model design. For instance, JAS-mine allows to store the list of regressors and their estimated coefficients externally to code, making it easy to change the specification of regression models used in the simulation and achieving a complete parallelisation between the tasks of the econometricians and those of the programmers. Moreover, tools for uncertainty analysis and search over the parameter space are also built in.

Abstract: We consider Bayesian inference techniques for Agent-Based (AB) models, as an alternative to simulated minimum distance (SMD). Three computationally heavy steps are involved: (i) simulating the model, (ii) estimating the likelihood and (iii) sampling from the posterior distribution of the parameters. Computational complexity of AB models implies that efficient techniques have to be used with respect to points (ii) and (iii), possibly involving approximations. We first discuss non-parametric (kernel density) estimation of the likelihood, coupled with Markov chain Monte Carlo sampling schemes. We then turn to parametric approximations of the likelihood, which can be derived by observing the distribution of the simulation outcomes around the statistical equilibria, or by assuming a specific form for the distribution of external deviations in the data. Finally, we introduce Approximate Bayesian Computation techniques for likelihood-free estimation. These allow embedding SMD methods in a Bayesian framework, and are  particularly suited when robust estimation is needed. These techniques are first tested in a simple price discovery model with one parameter, and then employed to estimate the behavioural macroeconomic model of De Grauwe (2012), with nine unknown parameters.

Abstract: In this paper, I elaborate on the role of agent-based (AB) modeling for macroeconomic research. My main tenet is that the full potential of the AB approach has not been realized yet. This potential lies in the modular nature of the models, which is bought by abandoning the straitjacket of rational expectations and embracing an evolutionary perspective. I envisage the foundation of a Modular Macroeconomic Science, where new models with heterogeneous interacting agents, endowed with partial information and limited computational ability, can be created by recombining and extending existing models in a unified computational framework.

Abstract: Two difficulties arise in the estimation of AB models: (i) the criterion function has no simple analytical expression, (ii) the aggregate properties of the model cannot be analytically understood. In this paper we show how to circumvent these difficulties and under which conditions ergodic models can be consistently estimated by simulated minimum distance techniques, both in a long-run equilibrium and during an adjustment phase.

Abstract: We test whether labor flexibility acts as a substitute to delocalization. Using Italian survey data, we show that a higher share of temporary workers appears to reduce the likelihood of future offshoring. However, once reverse causality and spurious correlation are controlled for with IV techniques, the relationship vanishes. This finding suggests that a solid argument that labor flexibility and offshoring are substitutes has still to be made.

Abstract: Dynamic microsimulation modeling involves two stages: estimation and forecasting. Unobserved heterogeneity is often considered in estimation, but not in forecasting, beyond trivial cases. Non-trivial cases involve individuals that enter the simulation with a history of previous outcomes. We show that the simple solutions of attributing to these individuals a null effect or a random draw from the estimated unconditional distributions lead to biased forecasts, which are often worse than those obtained neglecting unobserved heterogeneity altogether. We then present a first implementation of the Rank method, a new algorithm for assigning individual effects to the simulation sample. Out-of-sample validation of our model shows that use of the Rank method significantly improves the quality of the forecasts. 

Abstract: Many tasks require the input by more than one person very often with members of the team contributing sequentially. However, team production is plagued by disincentive problems. In this paper we investigate individual incentives to team production with sequential contributions and competing teams. We show that earlier contributors free-ride on team members contributing later on. We test our predictions on sports data using an athlete's performance in the individual race as a natural control for his relay performance. Our empirical findings strongly support the theoretical claims. 

Media coverage: "Take your time. Free-riding in swimming". The Economist, Nov. 20, 2014

Abstract: Starting from an agent-based interpretation of the well-known Bass innovation diffusion model, we perform a Montecarlo analysis of the performance of a method of simulated moment estimator. We show that nonlinearities of the moments lead to a small bias in the estimates in small populations, and prove that our estimates are consistent and converge to the true values as population size increases. Our approach can be generalized to the estimation of more complex agent-based models. However, a trade-o.ff emerges between model inadequacy and data inadequacy. This is particularly severe when only aggregate information is available, as common with diff.usion data. 

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Abstract: Stigma has been modeled in the literature as a cost of welfare participation, providing a disincentive to welfare entry; hence, traditional models predict that stigma leads to higher search effort and higher employment. We develop a more comprehensive model that accounts for the fact that welfare stigma may elicit psychological effects and foster negative attitudes towards welfare recipients, affecting their employment prospects. We find two contrasting effects. The first reinforces the standard prediction: rational individuals foreseeing the reduction in employability defer welfare entry (deterrence effect); the second goes in the opposite direction: once assisted, individuals experience less welfare-to-employment transitions, both because of reduced search effectiveness and of reduced search effort (entrapment effect). When stigma is not too high, the latter effect prevails: more stigma yields to less employment and more welfare participation. The result is stronger if individuals are not able to foresee their loss of employability.

Abstract: In this paper we provide a brief overview of the main characteristics of agent-based computational economics. We discuss its points of strength, with respect to analytical models, and its weaknesses. The latter are mainly related to how the results of a simulation model can be interpreted, and how the structural parameters of the model can be estimated. We then show how these problems can be dealt with.

Abstract: Flexibility - which in many European countries has been introduced or enhanced through the liberalization of non-standard contracts - does not necessarily imply work insecurity. By looking at a monetary measure of what one gets from the labor market and the social protection system in the medium run, we offer a new assessment of job precariousness in Italy. In particular, we find that: i) many non-standard workers are not insecure; ii) work insecurity also involves a non-negligible share of standard workers; iii) this notwithstanding, the risk of work insecurity for non-standard workers is significantly larger than for standard ones. 

Abstract: Objective: the study aims to estimate the differentials in life expectancy by income and work history in Italy during the 2000’s, in order to evaluate the level of actuarial equity of the recent Italian retirement reform in computing benefits proportional to the contributions paid. Design: retrospective cohort study. Setting and participants: mortality follow up of a 1% sample of the Italian workforce employed or self employed in the private sector, retired between 1985 and 2003 (about 63,000 people), whose work history and income since 1985 is registered in the National Institute for Social Insurance (INPS) data base.

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La crisi economica ha riportato al centro del dibattito il tema della precarietà e con esso quello della protezione dei lavoratori atipici. Ma che cos’è la precarietà e che relazione c’è con la flessibilità del mercato del lavoro e le forme contrattuali che più ne sono caratterizzate? 

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Abstract: From a theoretical standpoint the flexibility of a work arrangement does not imply precariousness for the workers involved. However our empirical analysis shows that flexibility introduced through non-standard contracts has had in Italy a negative impact on what we identified as three barriers against precariousness: employment continuity, a decent wage level and access to income-maintenance schemes in case of non-employment. Thus, even if flexibility and precariousness cannot be conflated at the analytical level, it turns out that they are strongly associated at the empirical level. In order to uncouple non-standard contracts and precariousness, we argue that each determinant of the latter should be addressed: employment continuity, wages, and social protection. In particular, we put forward a reform plan of the unemployment benefit system. 

Abstract: In a simple model of social interaction I analyze the welfare effects of positive (prescriptive) and negative (proscriptive) social norms, together with the private incentives for their enactment. I find that imposing no law is socially optimal when individual actions have no significant externalities, while bans become socially optimal as the externalities increase. Prescriptions are generally the worst choice, except when the externalities involved are very high. However, in the political arena support is rarely won for non intervention or for a ban, since an alternative majority will generally be found in favor of some prescription. This remains true even when strategic voting is considered, and provides an argument for the idea that a liberal state cannot be liberally enforced by rational voters.

Abstract: The challenge for social benefits and labor market policies is to support the living standard of low income families and encourage work and economic self-sufficiency, while keeping government costs low. A great concern is that income support schemes might actually reinforce unemployment and poverty, as the availability of benefits has adverse effects on the labor supply decision of individuals and on their ability to find a job. In this paper we develop a dynamic partial equilibrium model in order to explain the search behavior of non employed workers. This modeling strategy allows to investigate the effects in the out-of-unemployment exit rate accounting for a loss of employability as elapsed time in unemployment grows longer.

Abstract: In this paper we provide a general characterization of diffusion processes, allowing us to analyze both risk-sharing and contagion effects at the same time. We illustrate the relevance of our theory with reference to the subprime mortgage crisis and more in general to the processes of securitization and interbank linkages. We show that interdependencies in real and financial assets are beneficial from a social point of view when the economic environment is favorable and detrimental when the economic environment deteriorates. In the latter case, private incentives are such that too many linkages are formed, with respect to what is socially desirable. The risk of contagion increases the volatility of the outcome and thus reduces the ability of the financial networks to provide risk-sharing. Our analysis suggests that a likely major explanation of the subprime mortgage crisis is the process of securitization itself, in addition to the absence of transparency about the characteristics of the underlying assets that the multiple layers of financial intermediation fostered, as commonly claimed.This may call for a different emphasis on the role of public intervention. While a goal to stabilize the economy in good times should be to disrupt the channels that bring contagion, that is a positive correlation in the returns, in a period of worsening economic conditions our analysis suggests regulatory intervention aimed at disconnecting the economy at crucial nodes. Moreover, we show that policy interventions should be aimed at rescuing institutions, but not their managers. Diminishing the cost of default actually increases the inefficiency due to the divergence between the social and the individual optimum. 

Abstract: What is the relationship, if any, between Experimental Economics and Agent-based Computational Economics? Experimental Economics (EXP) investigates individual behaviour (and the emergence of aggregate regularities) by means of human subject experiments. Agent-based Computational Economics (ACE), on the other hand, studies the relationships between the micro and the macro level with the aid of artificial experiments. Note that the way ACE makes use of experiments to formulate theories is indeed similar to the way EXP does. The question we want to address is whether they can complement and integrate with each other. What can Agent-based computational Economics give to, and take from, Experimental Economics? Can they help and sustain each other, and ultimately gain space out of their restricted respective niches of practitioners? We believe that the answer to all these questions is yes: there can be and there should be profitable “contaminations” in both directions, of which we provide a first comprehensive discussion.

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Abstract: This paper studies how different behavioural norms affect individual and social welfare  in a population with heterogeneous preferences. We assume preferences are private information, and that interactions between individuals do not involve communication, nor bargaining. We first compare two stylized behavioural rules: one states "do to your neighbours what you would like them do to you", also known as Jesusí golden rule, while the other prescribes "don't do to your neighbours what you would not like them do to you", and is attributed to the Jewish rabbi Hillel (I century B.C.). We consider them as an idealization of an imperative and a more liberal approach to social behaviour. We find that aggregate welfare depends on the distribution of preferences in the society.  We then  contribute to the theory of social  norms by introducing a third,  more realistic behavioural rule: a retaliation  strategy that prescribes ìdo to your neighbours what they have done to youî. It is a sort of ìblindî tit-for-tat strategywhere no memory is conserved about the  identity of the offender and retaliation is adopted in the next  interaction, independently of whom the individual is interacting with. We show that, if followed by everybody, this strategy leads to the selection of a single behaviour, which becomes established as a social norm. This behaviour leads in general to more inequality, with respect to the  Jesus or Hillel rules. However,  it is sufficient that a small group (about 1%) of the population  keeps on playing one of the two moral norms to prevent the establishment of a social norm and recover the same social welfare that is obtained when everybody played the moral norm. 

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Abstract: Traditional (i.e. analytical) modelling practices in the social sciences rely on a very well established, although implicit, methodological protocol, both with respect to the way models are presented and to the kinds of analysis that are performed. Unfortunately, computer-simulated models often lack such a reference to an accepted methodological standard. This is one of the main reasons for the scepticism among mainstream social scientists that results in low acceptance of papers with agent-based methodology in the top journals. We identify some methodological pitfalls that, according to us, are common in papers employing agent-based simulations, and propose appropriate solutions. We discuss each issue with reference to a general characterization of dynamic micro models, which encompasses both analytical and simulation models. In the way, we also clarify some confusing terminology. We then propose a three-stage process that could lead to the establishment of methodological standards in social and economic simulations.

Abstract: This paper presents a non-equilibrium, agent-based model of workers and firms, with on-the-job searching, endogenous entrepreneurial decisions and endogenous wage and income determination. Workers and firms are heterogeneous, and learn their strategy in the labor market. The model is able to reproduce a number of stylized facts generally accepted in labor economics and industrial organization, such as the Wage, Beveridge and Okun curve, and the skewness of wage, income and firm size distribution. Most interestingly, important stylized facts such as a negatively sloped Wage Curve and a constant returns to scale matching function emerge only out-of-equilibrium, during the adjustment processes toward the stationary state. Thus, from a theoretical point of view the model suggests that taking these stylized facts as “building blocks” of equilibrium models might be misleading. The results stress two additional points. From a methodological point of view, the use of non-equilibrium computational models allowsfor a more comprehensive investigation of the labor market, by considering the endogenous character of many relevant variables. From an empirical point of view, the joint determination of all aggregate relationships and their dependence on the equilibrium or non-equilibrium state of the system suggest to move from the investigation of empirical regularities in isolation one from the other to a joint analysis.

Abstract: Most Oecd Countries are experiencing a rapid population ageing. Italy adds to this picture a very low labour market participation of the elders, so that most projections of the impact of ageing on the labour market are rather pessimistic. However, there are other long run modifications currently underway that will presumably have a sizeable impact on the labour market, above all changes in the retirement legislation, in educational choices and participation behaviour. In this paper we present LABORsim, an agent based microsimulation model of labour supply, which offers new insights on the likely evolution of the labour force in the next decades in Italy. LABORsim integrates the current demographic projections with simulation modules modelling retirement rules, retirement behaviours, migrations, education and participation choices, plus a consolle to implement various policy scenario analyses. When all these factors are taken into account, projections for next decades are not that pessimistic. In most scenario, the overall participation rate is expected to increase steadily for the next two decades, while shortages in the labour force supply and an unfavourable dynamics for the economic dependency rate are expected to show up only after 2020, when the baby boom generations will arrive at their retirement ages. This is not enough, however, to allow Italy to meet the EU Stocknolm and Lisbon targets for male and female employment rates for many decades to come. The sharp increase in the participation rates for the elderly (aged 55–64), mainly driven by the recent changes in the retirement eligibility criteria, will make it possible to meet the Stockholm target of 50% employment rate in this age group by 2015, i.e. with only 5 years of delay.

Abstract: Despite many years of active research in the field and a number of fruitful applications, agent-based modeling has not yet made it through to the top ranking economic journals. In this paper we investigate why. We look at the following problematic areas: (i) interpretation of the simulation dynamics and generalization of the results, and (ii) estimation of the simulation model. We show that there exist solutions for both these issues. Along the way, we clarify some confounding differences in terminology between computer science and economic literature.  

Abstract: In July 2003 a new Road Code was approved by the Italian parliament. Among other changes, the law states that on three-lane motorways the right lane should not be reserved anymore to slow vehicles. The model developed in this paper casts doubts on the wisdom of such a change, suggesting that reserving a separate lane for slow vehicles is generally better, in terms of number of accidents and slow-downs, than treating all vehicles the same way. In addition, a value for the speed threshold below which vehicles are considered slow can be found, for which the old rule also performs better in terms of average speed. This conclusion has applications beyond the Italian case. Moreover, it is shown to be extremely robust to refinements of the main assumptions concerning driving attitudes and the stochastic arrival of accidents.

Abstract: An urn-ball probabilistic model of the labor market is developed. Agents can be employed (voluntarily or involuntarily) unemployed, or entrepreneurs. The analytical long-run equilibrium probabilities for each state and the matching function are derived. In equilibrium, a higher reservation wage increases the number of start-ups, but has an overall negative impact on the unemployment rate. A more buoyant economy (higher average growth rate and higher average wages) is shown to be associated with a lower unemployment rate. Higher start-up costs discourage entrepreneurship and increase unemployment. More active search behavior leads first to a decrease in the unemployment rate, and then to a small increase, due to increased coordination failure induced by the higher number of applications sent by job seekers. The out-of-equilibrium dynamics are investigated through an agent-based simulation, which also provides results on firm demography. Important empirical regularities such as the Beveridge and the Okun curve are recovered. Finally, the simulation model is used to investigate departures from maximizing individual behavior and the effects of more realistic assumptions about profits and the business cycle.

Abstract: Multiplicative models of firm dynamics á la Gibrat have become a standard reference in industrial organization. However, some unpleasant properties of their implied dynamics - namely, their explosive or implosive behaviour (firm size and number collapsing to zero or increasing indefinitely) - have been given only very little attention. In this paper I investigate using simulations which modifications to the standard multiplicative model of firm dynamics lead to stable (and reasonable) distributions of firm size. I show that in order to obtain stable systems for a wide range of average growth rate, either heteroskedasticity in the growth rates has to be assumed, or entry and exit mechanisms included. In particular I show that combining the broad class of threshold entry mechanisms and the more restricted class of threshold exit mechanisms with overcapacity penalizing all firms (where entry and exit are determined with reference to an exogenously defined total capacity of the market), lead to stable distributions even in the case of growth rate homoskedasticity, given a non-zero minimum threshold for firm size.