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Testing the Statistical Significance of Microsimulation Results: Often Easier than You Think. A Technical Note

  • Goedemé, Tim
  • Van den Bosch, Karel
  • Salanauskaite, Lina
  • Verbist, Gerlinde

In the microsimulation literature, it is still uncommon to test the statistical significance of results. In this paper we argue that this situation is both undesirable and unnecessary. Provided the parameters used in the microsimulation are exogenous, as is often the case in static microsimulation of the first-order effects of policy changes, simple statistical tests can be sufficient. Moreover, standard routines have been developed which enable applied researchers to calculate the sampling variance of microsimulation results, while taking the sample design into account, even of relatively complex statistics such as relative poverty, inequality measures and indicators of polarization, with relative ease and a limited time investment. We stress that when comparing simulated and baseline variables, as well as when comparing two simulated variables, it is crucial to take account of the covariance between those variables. Due to this covariance, the mean difference between the variables can generally (though not always) be estimated with much greater precision than the means of the separate variables.

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Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number em18/13.

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Date of creation: 14 Nov 2013
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Publication status: published
Handle: RePEc:ese:emodwp:em18-13
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  1. Afshartous, David & Preston, Richard A., 2010. "Confidence intervals for dependent data: Equating non-overlap with statistical significance," Computational Statistics & Data Analysis, Elsevier, vol. 54(10), pages 2296-2305, October.
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  13. Navicke, Jekaterina & Rastrigina, Olga & Sutherland, Holly, 2013. "Nowcasting indicators of poverty risk in the European Union: a microsimulation approach," EUROMOD Working Papers EM11/13, EUROMOD at the Institute for Social and Economic Research.
  14. Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494, March.
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