The aim of this paper is to describe the state-of-the-art in simulation and to illustrate benefits and problems of linking micro and macro models by analysing flat tax proposals for Germany. The analysis shows that a personal income flat tax can indeed overcome the fundamental equity efficiency trade-off while simultaneously increasing the tax revenue. However, this result does not hold for a f...

We investigate how differences in set-up costs of various types affect the trade-off between global efficiency and spatial equity and show that the standard assumption of symmetry in fixed costs masks the existence of an interesting effect: the range of available varieties varies depends on the spatial distribution of firms. In such a setting, even when the market outcome leads to excessive agg...

This paper investigates the impact of the heterogeneity of the labor force on the spatial distribution of activities. This goal is achieved by applying the tools of discrete choice theory to an economic geography model. We show that taste heterogeneity acts as a strong dispersion force. We also show that the relationship between the spatial distribution of the industry (the wage differential) a...

In the modern welfare state a substantial part of an individual’s tax bill is transferred back to the same individual taxpayer in the form of social transfers. This provides a rationale for financing part of social insurance through mandatory savings accounts. We analyze the behavioral and welfare effects of compulsory savings accounts in an intertemporal model with uncertainty, endogenous invo...

European governments aim to raise labour supply, cut unemployment rates and, at the same time, maintain social cohesion. Yet, economists have always stressed the trade-off between these objectives. This paper explores whether the frontier of the equity-efficiency trade-off can be shifted outwards in the Netherlands by using an applied general equilibrium model. In particular, we consider variou...

Size-discovery trade mechanisms allow large quantities of an asset to be exchanged at a price that does not respond to price pressure. Primary examples include “workup” in Treasury markets, “matching sessions” in corporate bond and CDS markets, and blocktrading “dark pools” in equity markets. By freezing the execution price and giving up on market-clearing, size-discovery mechanisms overcome co...

We use economy-wide simulation methods to analyze the outcome of a simple REDD+ program in a mixed subsistence/commercial-agriculture economy. Alternative scenarios help trace REDD+'s causal chain, revealing how trade-offs between the program's public and private costs and benefits determine its effectiveness, efficiency and equity (the 3Es). Scenarios reveal a complex relationship between the ...

While making location decisions, the distribution of distances (outcomes) among the service recipients (clients) is an important issue. In order to comply with the minimization of distances as well as with an equal consideration of the clients, mean-equity approaches are commonly used. They quantify the problem in a lucid form of two criteria: the mean outcome representing the overall efficienc...

I kidney allocation, transplant candidates may have private information about their propensity to enjoy good outcomes after transplantation or about their relative expected improvement in quality of life after transplantation. This paper develops a mechanism design model to investigate the effect of such information asymmetry on the kidney allocation system. In this model, there are n transplan...