Microsimulation models
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Based on micro-data these models compute the impacts of various policy changes on small units such as individuals, households or firms. The latter are characterised by individual properties (e.g. income and expenditures, age, family status, profits). By using a representative sample micro-level changes can be aggregated in order to achieve macro-level effects. Microsimulation models are tools for policy recommendations: During the last ten years they have been widely used particularly in empirical tax policy analysis in several European and OECD countries. Typical applications of tax-benefit models are, for example, the calculation of the distributional effects of different tax-benefit policy scenarios (i.e. the calculation of the tax payable, identification of individuals who would benefit or be negatively affected by a specific policy, etc.).[1]
