WorkSim: An Agent-Based Model of Labor Markets

Abstract

In this paper, we provide an overview of the WorkSim model, an agent-based framework designed to study labor markets. The first objective of this model was to reproduce, within rigorous stock-flow accounting, the gross flows of individuals between important work-states: i.e., employment (distinguishing fixed term contracts and open-ended contracts), unemployment and inactivity. French legal institutions of the labor market are modelled in some detail and constrain the decisions of the agents on job flows and worker flows. Firms and individuals are heterogeneous and all decisions are taken on the basis of bounded rationality, yet employers as well as workers form imperfect anticipations. One important theoretical novelty of the model is that we consider multi-job firms and shocks on the individual demand of the firms. Employers consider anticipated shocks when they decide on the types of contract. Once the model was calibrated, the secondary objective was to characterize the nature of the labor market under study, and notably the differentiated roles of the two types of contracts and their impact on unemployment. This is achieved, first by examining the patterns of flows and stocks of labor and secondly by sensitivity experiments, modifying certain exogenous parameters and variables such as total demand. We then used the model as a tool for experimenting labor market policies, including changes in the labor law in France.