Social modelling and public policy: what is microsimulation modelling and how is it being used?

The aim of this paper is to provide an overview of social modelling, and in particular a general introduction to and insight into the potential role and usefulness of microsimulation in analysing public policy. Some of the main distinguishing characteristics of social models are discussed. The paper then describes recent microsimulation modelling developments at the National Centre for Social and Economic Modelling (NATSEM) and how these are being used to inform social and economic policy in Australia. Examples include: the potential use of NATSEM's static tax and cash transfer model (STINMOD) in assessing changes in the Disability Support Pension; modelling the Pharmaceutical Benefits Scheme; application of dynamic modelling for assessing future superannuation and retirement incomes; and the development of a geographical based, that is, regional microsimulation model (SYNAGI). Various technical aspects of the modelling are highlighted in order to illustrate how these types of socio-economic models are constructed and implemented.