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An assessment of PenSim2

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  • Carl Emmerson

    ()
    (Institute for Fiscal Studies)

  • Howard Reed

    (Institute for Fiscal Studies)

  • Andrew Shephard

    ()
    (Institute for Fiscal Studies and University College London)

Abstract

The Department for Work and Pensions (DWP)’s 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. This paper presents the results of an assessment of Pensim2 by researchers at the IFS. We start by looking at the overall structure of the model, and how it compares with other dynamic policy analysis models across the world. We make recommendations at this stage as to how the overall modelling strategy could be improved. We 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, we 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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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W04/21.

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Length: 51 pp.
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:ifs:ifsewp:04/21

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Keywords: pensions; microsimulation; policy analysis;

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References

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  1. Goldberger, A.S., 1989. "Economic And Mechanical Models Of Intergenerational Transmission," Working papers 374, Wisconsin Madison - Social Systems.
  2. Gary S. Becker & Nigel Tomes, . "Human Capital and the Rise and Fall of Families," University of Chicago - Population Research Center 84-10, Chicago - Population Research Center.
  3. John Rust & Christopher Phelan, 1994. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Public Economics 9406005, EconWPA, revised 06 Jul 1994.
  4. Richard Disney & Carl Emmerson & Matthew Wakefield, 2003. "Ill health and retirement in Britain: a panel data based analysis," IFS Working Papers W03/02, Institute for Fiscal Studies.
  5. Richard Blundell & Costas Meghir & Sarah Smith, 2002. "Pension Incentives and the Pattern of Early Retirement," Economic Journal, Royal Economic Society, vol. 112(478), pages C153-C170, March.
  6. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  7. Donna B. Gilleskie & David M. Blau, 2006. "Health insurance and retirement of married couples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 935-953.
  8. Eric French, 2004. "The Effects of Health, Wealth and Wages on Labor Supply and Retirement Behavior," 2004 Meeting Papers 96, Society for Economic Dynamics.
  9. Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
  10. Boland, Lawrence A, 1981. "On the Futility of Criticizing the Neoclassical Maximization Hypothesis," American Economic Review, American Economic Association, vol. 71(5), pages 1031-36, December.
  11. Amemiya, Takeshi, 1978. "On a two-step estimation of a multivariate logit model," Journal of Econometrics, Elsevier, vol. 8(1), pages 13-21, August.
  12. Blundell, R. & Browning, M. & Meghir, C., 1989. "A Microeconometric Model Of Intertemporal Substitution And Consumer Demand," The Warwick Economics Research Paper Series (TWERPS) 324, University of Warwick, Department of Economics.
  13. Caldwell, Bruce J, 1983. "The Neoclassical Maximization Hypothesis: Comment," American Economic Review, American Economic Association, vol. 73(4), pages 824-27, September.
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Cited by:
  1. Li, Jinjing & O'Donoghue, Cathal, 2012. "A methodological survey of dynamic microsimulation models," MERIT Working Papers 002, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Emanuele Ciani & Marcello Morciano, 2011. "Estimation and Simulation of Earnings in IT-SILC," Department of Economics 0660, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
  3. Aaron George Grech, 2013. "How best to measure pension adequacy," CASE Papers /172, Centre for Analysis of Social Exclusion, LSE.
  4. Jinjing Li & Cathal O'Donoghue, 2012. "Simulating Histories within Dynamic Microsimulation Models," International Journal of Microsimulation, Interational Microsimulation Association, vol. 5(1), pages 52-76.

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