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Nowcasting the distribution of disposable income: A microsimulation framework enhanced by machine learning

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  • OECD

Abstract

Timely and accurate distributional income data are essential for monitoring inequality, assessing the adequacy of tax-benefit systems, and designing policy responses during periods of rapid economic change. However, income and inequality statistics derived from EU-SILC are typically published with a lag of 12 to 18 months, limiting their usefulness during fast-moving shocks such as the COVID-19 pandemic, the 2022 energy price shock, or a severe recession. This paper presents results from a new nowcasting framework designed to reduce this information gap for EU Member States. By combining machine-learning (ML) forecasts of market income with EUROMOD microsimulation under the latest available tax-benefit rules, the framework produces timely estimates and forecasts of income inequality.

Suggested Citation

  • Oecd, 2026. "Nowcasting the distribution of disposable income: A microsimulation framework enhanced by machine learning," OECD Papers on Well-being and Inequalities 41, OECD Publishing.
    • Handle: RePEc:oec:wiseaa:41-en
    DOI: 10.1787/b02cdd40-en
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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