Update and Extension of the EU Labour Market Model
Report - Update and Extension of the Labour Market Model
Mag. Ludwig Strohner
Head of the Public Finance Research Section
DI Johannes Berger
Head of the Labour Market and Social Security Research Section
In an effort to improve the European Commission's understanding of the transmission mechanisms of labor market policy measures as part of the European Employment Strategy, the Commission's DG EMPL commissioned external experts to develop the Labour Market Model (EU-LMM) as part of the "Modelling of Labour Markets in the European Union" project. As part of the follow-up projects "Development/Maintenance of the Labour Market Model" and "Updating of the Labour Market Model", the model was further expanded, updated and documented, and analyses of illustrative scenarios were carried out. The two EcoAustria researchers Johannes Berger and Ludwig Strohner played a leading role in these projects.
With the current project "Update and Extension of the Labor Market Model", our researchers have implemented two objectives: Firstly, a complete update of the already existing LMM with current statistical and institutional data was carried out as well as a recalibration of the model. Secondly, the project included an extension of the LMM: in addition to the 15 countries already modeled, the model was extended to include the other EU member states and an "aggregated EU-27 model" was developed. In addition, the programming language of the model was changed from GAUSS to R. The model was presented to Commission staff as part of a Triple A talk. There are currently plans to make an open source version of the model available.
The LMM complements existing Commission models, such as QUEST used by DG ECFIN, and provides a basis for determining the direction and intensity of the impact of labor market policies, other policy reforms and external factors. Analyses using the LMM are regularly published in the "Employment and Social Developments in Europe" report, DG EMPL's annual publication. The LMM is a dynamic, computable general equilibrium model with a detailed description of the labor market. It is based on a detailed microfoundation of the actors involved, namely households and companies. In particular, the model distinguishes between eight different age groups (those in education, of working age or retired) and three different groups of educational qualifications (low, medium and highly qualified).
