nep-cmp New Economics Papers
on Computational Economics
Issue of 2017‒02‒19
two papers chosen by
Stan Miles
Thompson Rivers University

  1. National minimum wage in South Africa: A Computable General Equilibrium Model Analysis By Jean Luc Erero
  2. Pension reform with entrepreneurial choice By Hofbauer, Florian; Fehr, Hans

  1. By: Jean Luc Erero
    Abstract: This paper analyses the economy-wide impact of the national minimum wage on the South African economy. The analysis was conducted using a static computable general equilibrium (CGE) model of South Africa, which captured the observed structure of South Africa’s economy. The parameters of the CGE equations were calibrated to observed data from a social accounting matrix (SAM) for 2010. One policy option with three scenarios was considered. The results from the policy scenario highlight that an increase in the national minimum wage has a negative and distortive impact on the reported macro-economic variables. This is particularly seen by a decline in GDP, employment and welfare. For instance, in the first scenario the real GDP decreased by 1.8506% when the national minimum wage was set to R3000 across all sectors.
    Keywords: national minimum wage, CGE model, South Africa
    JEL: C68 J08 J31
    Date: 2016–11
  2. By: Hofbauer, Florian; Fehr, Hans
    Abstract: This paper presents an overlapping generations model with occupational choice that allows for entrepreneurial exit, entry and investment decisions in the presence of idiosyncratic productivity risk and borrowing constraints. The model is applied to analyze the consequences of three pension reforms in Germany: A move towards a comprehensive paygo system, the introduction of flat benefits, and a funded pension system. Our simulation results indicate that pension systems directly affect occupational choice when households have a choice to avoid the implied tax burden. In addition, pension systems influence indirectly through changes in financial constraints and factor prices. Direct and indirect effects may neutralize each other and we are able to separate them quantitatively. We also document that the pension system might have opposite effects on different types of entrepreneurs. Quite surprisingly, some pension reforms increase labor input in the corporate sector and entrepreneurial activities at the same time. Finally, pension reforms have a strong impact on wealth inequality in our set up. Consequently, occupational choice and the pension system are strongly interrelated and more research is needed to understand this connection.
    JEL: C68 H55 J26
    Date: 2016

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