ILUTE Microsimulation Modelling of Social/Financial Processes – An Overview Antoine Haroun June 2004

ILUTE Outline Static and Dynamic Microsimulation in the social context European Models  EUROMOD  POLYMOD  Applications Australian Models  STINMOD  DYNAMOD  Applications

ILUTE Static Microsimulation in the Social Context Most social microsimulation models are static. i.e. there is no attempt to model a time sequence of changes (Creedy 2001). Static models measure the effects of policy changes on the morning after and provide estimates of the immediate impacts of policy changes Static models are relatively simple in structure and assess what each individual would have under the new policy They are used in “WHAT IF” scenarios

ILUTE Dynamic Microsimulation in the Social Context Dynamic models are more complex and more expensive to build Dynamic models often start with the same cross- section sample surveys as static models. However, individuals are moved progressively forward through time. They are aged and stochastically undergo transitions. The characteristics are recalculated for each time period Dynamically ageing models involve updating each attribute, for each-micro unit for each time interval

ILUTE European & Australian Centres CRESS – Centre for Research in Social Simulation, University of Surrey Microsimulation Unit, Department of Applied Economics, University of Cambridge NATSEM – National Centre for Social and Economic Modelling, University of Canberra

ILUTE EUROMOD EUROMOD is a tax-benefit static microsimulation model that estimates the effects of changes in social and fiscal policies on measures of personal income and social welfare It is an integrated model covering 15 European Union countries Provides a European-wide perspective on social and economic integration policies that are implemented at the European, national or regional level Examines the impact of national policies on population The differential impact of coordinated European Policy individual member states Team of 35 individuals from 18 institutions

ILUTE POLYMOD POLYMOD is a tax-benefit microsimulation model constructed and maintained by the Microsimulation Unit at the University of Cambridge POLIMOD calculates liabilities for or entitlements to income tax, national insurance contributions, child benefit, family credit, working tax credit, child tax credit and income support The model was used to estimate the impact of government policy on child poverty in Britain (Sutherland 2004)

ILUTE EUROMOD - Application Employment Transitions in 13 European Countries. Levels, Distribution and Determining Factors of Net Replacement (Immervoll & O’Donoghue 2003) EUROMOD was utilized to simulate the net replacement rates in the 13 countries. Using household incomes to look at different types of labour market transitions EUROMOD was used to isolate the influence of social and fiscal policy factors and other income to determine the level of out of work income versus income when in work Patterns of income of different types of individuals with high replacement rates were very different

ILUTE EUROMOD - Application Child-targeted tax-benefit reform in Spain in a European context using EUROMOD (Levy 2003) Spain has one of the lowest expenditures on family social protection, the third highest child poverty and the second lowest fertility rate in the EU EUROMOD was used to assess the tax-benefit reforms to try to improve the situation It compares policies of 4 EU countries to the ones in Spain (Denmark, Germany, France and UK)

ILUTE EUROMOD - Application Social indicators and other income statistics using the EUROMOD Baseline: Comparison with Eurostat and national statistics (Mantovani & Sutherland 2003) The statistics summarizing the EUROMOD baseline are broadly in line with other source and provides an adequate starting point for policy simulation experiments Headline indicator statistics may compare well, but there are underlying differences Not all types of comparison are possible for all countries

ILUTE POLYMOD - Application Combining Household Income and Expenditure Data in Policy Simulations (2001) Sutherland, H. Taylor, R. Gomulka, J. The analysis of the distributional impact of fiscal policy proposals often requires information on household expenditures and incomes. It is unusual to have one data source with high quality information on both, and this problem is generally overcome with statistical matching of independent data sources. Grade Correspondence Analysis (GCA) was investigated as a tool to improve the matching process. An evaluation of alternative methods was conducted using datasets from the UK Family Expenditure Survey (FES), which is unusual in containing both income and expenditure at a detailed level of disaggregation. Imputed expenditures were compared with actual expenditures through the use of indirect tax simulations using the UK microsimulation model, POLIMOD. The most successful methods were then employed to enhance income data from the Family Resources Survey (FRS) and the synthetic dataset is used as a microsimulation model dataset.

ILUTE STINMOD STINMOD is NATSEM’s publicly available static microsimulation model that simulates the payment of personal income taxes and the recipt of social security cash transfers It is used to estimate the impact of these systems on Australian families STINMOD applies the rules of the income tax and government ash transfer programs to a database of income units representing the Australian population The first version was released in 1994 STINMOD can provide estimates of the immediate impact of a proposed policy change The basefiles are constructed from known benchmark data

ILUTE DYNAMOD DYNAMOD is a NATSEM’s dynamic microsimulation model. The model starts with a 1% sample of the 1986 Census data and ages the individuals month by month for 60 years It is used to assess the long range impact of policies It generates lifetime profiles of people in terms of demographic events such as fertility, mortality, couple formation and dissolution, overseas migration. In addition, it includes characteristics pertaining to education participation and attainment, labour force activity and earnings.

ILUTE STINMOD & DYNAMOD - Applications Switch to PDF file