An assessment of Pensim2

An assessment of Pensim2
Document type
Working Paper
Emmerson, Carl; Reed, Howard; Shephard, Andrew
Institute for Fiscal Studies
Date of publication
30 December 2004
The Institute for Fiscal Studies Working Papers
Trends: economic, social and technology trends affecting business
Business and management
Material type

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This paper presents the results of an assessment of Pensim2 by researchers at the Institute for Fiscal Studies (IFS). The Department for Work and Pensions (DWP) Pensim2 model is a dynamic microsimulation model. The principal purpose of this model is to estimate the future distribution of pensioner incomes, thus enabling analysis of the distributional effects of proposed changes to pension policy. The paper starts by looking at the overall structure of the model, and how it compares with other dynamic policy analysis models across the world. The authors make recommendations at this stage as to how the overall modelling strategy could be improved. They then go on to analyse the characteristics of most of the individual modules which make up Pensim2, examining the data used and the regression and predictions used in each step. The results from this examination are used to formulate a set of short and medium-term recommendations for developing and improving the model. Finally, the authors look at what might become possible for the model over a much longer time frame - looking towards developing a 'Pensim3' model over the next decade or so.

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