Rui Nicola - Could we move forward to a dynamic microsimulation modelling setting following the footsteps of EUROMOD?

  • Presenting author: Rui Nicola (University of Southampton)

  • Authors: Rui Nicola, Maria Evandrou, Jane Falkingham

  • Session: C01A - Dynamic / Long term [2] - Wednesday 9:00-10:30 - Ceremonial Hall

The long-term perspectives of pension policy and its dimensions of fiscal sustainability and adequacy remain of utmost importance in the realm of social policy within the European Union (EU), especially in light of the challenges posed by population ageing. This is evident through initiatives like the European Pillar of Social Rights, accompanied by its Action Plan and Social Scoreboard. To effectively monitor, analyze, and discuss this complex matter, an international comparative approach is coordinated by EU institutions, utilizing standardized methodological tools and harmonized data collected from all EU member states, which results in key publications such as the Ageing Report and the Pension Adequacy Report. These regular analyses provide a basis for discussing and informing policy decisions, for fostering fiscal sustainability and adequacy. As EU member states and institutions prioritize goals related to combating poverty and inequality, the Statistics on Income and Living Conditions (SILC) and EUROMOD have played a crucial role. Nevertheless, given the intertemporal nature of pension policy, dynamic microsimulation models (DMM) offer additional advantages for capturing the long-term distributional perspectives. Recognizing the value of such models, and following previous efforts to strengthen the long-term analysis of the aforementioned publications with the use of dynamic microsimulation, the paper documents the journey for developing DYNAPOR, a DMM for pension policy analysis for Portugal, and discusses its methodological options and some possibilities for the way forward. This model was designed to enhance comparability and contribute to the discussion of a comparative dynamic microsimulation model akin to EUROMOD. The main options considered for this endeavour included the choice of development tools, the lessons learned from previous DMM designs, and the data-related options. The choices made regarding these features draw inspiration from EUROMOD and contribute to the potential discussion of a EURODYM, aligning with the vision of collaboration presented by Dekker and Zaidi in 2011. It is also connected to Wolfson’s discussion of microsimulation in a multi-country context, as referenced in the evaluation of progress made in dynamic microsimulation modelling, half a century after Guy Orcutt’s seminal paper. Furthermore, the European Commission acknowledged in 2012 that if all member states could apply dynamic microsimulation models, likely scenarios that offer guidance to policymakers could be constructed.