Microsimulation in Australia: lessons from NATSEM

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Microsimulation in Australia lessons from
NATSEM

• Presentation to ESRC/BSPS
• UK Microsimulation Bridging the Gaps Seminar
• Sussex University, September 11 2009

Justine McNamara
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Acknowledgements

• Thanks to Ann Harding and other senior management
  and staff at NATSEM for their contributions to
  this presentation
• Thanks to ESRC/BSPS

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Background

• Australia
• NATSEM
• Defining success

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Outline of presentation

• Establishment of NATSEM
• Self-funding
• Development of modelling capabilities
• Cross-model synergies
• Extending models
• Public policy applications
• Staffing
• KEY SUCCESS FACTORS

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History of NATSEM

• National Centre for Social and Economic Modelling
  (NATSEM) established 1993 at University of
  Canberra
• First academic research centre to specialise in
  microsimulation modelling in Australia
• Key role of Ann Harding

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History of NATSEM

• Had 5 years of core funding from then Department
  of Health, Housing and Community Services
  (1993-1997)
• Participation of govt on NATSEM Advisory Board
• Early establishment of STINMOD model (static tax
  transfer model)
• STINMOD now maintained by NATSEM for govt
• STINMOD actively used by Treasury other depts
  (e.g. in Budget papers)

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Establishment of NATSEM success factors

• Visionary leader
• Close connections with government/policy process
• Got in first

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History of NATSEM

• Transferred from government funding to
  self-funding over 3 years
• Reflected changing funding environment
  (short-term, competitive)
• STINMOD pivotal in making this transfer
  successful
• Very close internal monitoring of
  budgets/timelines (eg TRS)

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Self-funding success factors

• Very strong emphasis on deliverables
• Some ongoing STINMOD funding
• Close collaboration with government officials
• Marketing/awareness/reputation
• Expanding vision
• Staff with ability to bring in funds
• Government departments that use microsimulation
  models
• Also many challenges

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Development of modelling capabilities

• STINMOD
• DYNAMOD
• Health modelling (MediSIM, CareMOD, Diabetes)
• ChildMOD
• HouseMOD
• SpatialMSM
• APPSIM

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MediSim The Australian Pharmaceutical Benefits
Scheme

• PBS aims to provide affordable access to
  prescription medicines
• MediSim constructed on top of National Health
  Survey microdata and simulates changes in
• the drugs listed under the PBS
• drug prices
• the rules (settings) of the PBS copayments and
  safety net thresholds
• costs to government and consumers
• the distributional impacts

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of PBS outlays received by each income quintile
of Australians
Source Harding et al, 2004
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Building modelling capabilities success factors

• Joining up with powerful partners who can provide
  funding, including private sector organisations
• Starting small and building out
• Developing cross-disciplinary linkages where
  microsim is part of a larger project focused on
  particular subject area
• Challenges include
• Pros and cons of advisory boards/steering
  committees
• Over-committing

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Cross-model synergies/extending models

• STINMOD often key
• Spatial microsimulation methodology used for
  health, housing, broader socioeconomic modelling
• Dynamic modelling, spatial modelling can be
  linked to STINMOD
• APPSIM may inform dynamic dementia model
• Some micro/macro collaborations

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Links between models (examples)
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CHILDMOD An alternative child support scheme

• A recent STINMOD extension
• Child Support Scheme requires separated parents
  to each contribute to the costs of raising their
  children
• Many concerns about Scheme -gt Ministerial Task
  Force established to review scheme in 2004
• Govt accepted Ministerial Task Force
  recommendations new scheme started July 08
• NATSEM built the Taskforce a hypothetical
  (illustrative families) model (see Harding and
  Percival, 2007)

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Proposed SchemePayments of Non-Resident Parent
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Extending models success factors

• Agenda management and agenda setting
• Taking advantage of opportunities (needs
  sufficient flexibility)
• Look ahead and identify possible issues, then
  approach potential partners
• Challenges include
• Model maintenance

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Cross-model synergies success factors

• Acceptance by key policy players of STINMOD
• Being able to see possibilities and identify
  possible connections
• Sometimes co-operation with other agencies
  models falls short of actually joining models up
• Challenges include
• IP issues

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Public policy applications examples

• STINMOD tax reform, welfare to work
• SpatialMSM pension reform
• HouseMOD housing assistance

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The Great Australian tax reform debate, 1998-2000

• Introduction of 10 goods services tax (like
  VAT)
• Removal of existing inefficient indirect taxes
  (wholesale sales tax)
• Major cuts in income tax
• Large increases in social security to compensate
  poor
• Question for Senate how to ensure tax reform
  package is fair?
• Answer assess its distributional impact using
  microsimulation models -gt use NATSEM
• Compensation to poor increased after NATSEM
  analysis

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Welfare to Work reforms, 2005 budget announcement

• Move to make sole parents on welfare get jobs
• Those on Parenting Payment Single before 1 July
  2006 remain pensioners (relatively generous
  payment)
• Those commencing after 1 July 2006
• Go on PPS if youngest child aged lt 6 years
• Moved onto Newstart when youngest child turns 6
• Start on Newstart immediately if youngest child
  aged 6 yrs
• NATSEM commissioned by welfare groups to analyse
  impact of change (see Harding et al, 2005)
• Age of child later changed to 8 years after
  public debate

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Public policy applications success factors

• Close links with policy makers and an
  understanding of how policy is made
• Need to undertake research for organisations
  across the political spectrum
• ARC Linkage grants
• AMP-NATSEM reports
• Reputation for impartiality and quality
• Reputation for delivering
• Microdata analysis as well as microsimulation

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Staffing success factors (and challenges)

• Collegiate environment
• Strong support for researchers from non-academic
  senior staff member
• Multidisciplinary
• Ongoing challenges
• recruitment
• loss of trained staff

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Key success factors

• Visionary leader
• Willingness to evolve/innovate
• Involvement with agenda setting
• True collegiate/team environment and senior
  support
• Public/media interested in distributional
  analyses
• Staff with skills/focus on bringing in money
• Continuing challenges
• Balance between academic/soft money priorities
• Funding
• Staffing

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Selected references

• STINMOD and STINMOD applications (static
  tax-benefit model)
• Toohey, M and Beer, G, 2004, Financial incentives
  to work for married mothers under A New Tax
  System, Australian Journal of Labour Economics,
  vol. 7, no. 1, p. 5369, January
• Harding, A., Warren, N., Robinson, M. and
  Lambert, S., 2000, The Distributional Impact of
  the Year 2000 Tax Reforms in Australia, Agenda,
  Volume 7, No 1, pp 17-31.
• McNamara, J, Lloyd, R, Toohey, M and Harding, A,
  2004, Prosperity for all? How low income families
  have fared in the boom times, Report commissioned
  by the Australian Council of Social Service, the
  Brotherhood of St Laurence, Anglicare NSW, Family
  Services Australia, Canberra, October.
• A. Harding, R. Lloyd N. Warren, 2006, "The
  Distribution of Taxes and Government Benefits in
  Australia", in Dimitri Papadimitriou. (ed), The
  Distributional Effects of Government Spending and
  Taxation, Chapter 7, Palgrave Macmillan, New
  York., pp. 176-201.
• Harding, A, Vu, Q.N, Percival, R Beer, G,
  Welfare-to-Work Reforms Impact on Sole Parents
  Agenda, Volume 12, Number 3, 2005, pages 195-210
  (www.agenda.anu.edu)
• Harding, A., Payne, A, Vu Q N and Percival, P.,
  2006, Trends in Effective Marginal Tax Rates,
  1996-97 to 2006-07, ,AMP NATSEM Income and
  Wealth Report Issue 14, September (available from
  www.amp.com.au/ampnatsemreports)
• Lloyd, R, 2007, STINMOD Use of a static
  microsimulation model in the policy process in
  Australia, in Harding, A and Gupta, A.,
  Modelling Our Future Population Ageing, Social
  Security and Taxation (eds), North Holland,
  Amsterdam.
• Harding, A., Payne, A., Vu, Q.N., and Percival,
  R. Interactions between Wages and the Tax /
  Transfer System. Report to the Australian Fair
  Pay Commission, September 2006 (available from
  http//www.fairpay.gov.au/fairpay/Research/Researc
  h2006/Research2006.htm )
• CHILDMOD (static child support model)
• Ministerial Taskforce on Child Support, 2004, In
  the Best Interests of Children Reforming the
  Child Support Scheme, Report of the Ministerial
  Taskforce on Child Support, May (see Chap 16 for
  output from CHILDMOD) (http//www.facsia.gov.au/in
  ternet/facsinternet.nsf/family/childsupportreport.
  htm)
• Harding, A. and Percival, R. 2007, The
  Australian Child Support Reforms A Case Study of
  the Use of Microsimulation Modelling in the
  Policy Development Process. Australian Journal
  of Public Administration, Vol. 66, No. 4,
  December, pp 422-437

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Selected references

• MediSim (static model of the Pharmaceutical
  Benefits Scheme)
• Brown. L., Abello, A., Phillips, B. and Harding
  A., 2004, "Moving towards an improved
  microsimulation model of the Australian PBS'
  Australian Economic Review., 1st quarter
• Abello, A., Brown, L., Walker, A. and Thurecht,
  T., 2003, An Economic Forecasting Microsimulation
  Model of the Australian Pharmaceutical Benefits
  Scheme, Technical Paper No. 30, National Centre
  for Social and Economic Modelling, University of
  Canberra.
• Harding, A., Abello, A., Brown, L., and Phillips,
  B. 2004 The Distributional Impact of Government
  Outlays on the Australian Pharmaceutical Benefits
  Scheme in 2001-02, Economic Record, Vol 80,
  Special Issue, September
• Brown, L., Abello, A. and Harding, A.2006.
  Pharmaceuticals Benefit Scheme Effects of the
  Safety Net. Agenda, vol. 13, no. 3, pp211-224
• Diabetes Model
• Thurecht, L, Brown, L. and Yap, M. (2007)
  Economic Modelling of the Prevention of Type 2
  Diabetes in Australia. Paper presented at the
  International Microsimulation Association
  Conference, Vienna, August 2007.
• Brown, L., Harris, A., Picton, M., Thurecht, L.,
  Yap, M., Harding, A. Dixon, P. and Richardson, J.
  (2007) Linking Microsimulation and
  Macro-Economic Models to Estimate the Economic
  Impact of Chronic Disease Prevention. Paper
  presented at the International Microsimulation
  Association Conference, Vienna, August 2007.

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Selected references

• APPSIM (dynamic Australian Population and Policy
  Simulation Model )
• Keegan, M. (2009) Mandatory superannuation and
  self-sufficiency in retirement An application of
  the APPSIM dynamic microsimulation model. Paper
  presented at the 2nd General Conference of the
  International Microsimulation Association,
  Ottawa, Canada, June 2009
• Keegan, M. and Kelly, S. (2009) Dynamic
  microsimulation modelling of social security and
  taxation. Online Working Paper 14.
• Lymer, S. (2009) Population ageing and health
  outlays assessing the impact in Australia during
  the next 40 years. Paper presented at the 2nd
  General Conference of the International
  Microsimulation Association, Ottowa, Canada, June
  2009.
• Pennec, S. (2009) APPSIM - Cohort component
  population projections to validate and align the
  dynamic microsimulation model APPSIM. Online
  Working Paper - WP12
• Percival, R. (2007) APPSIM - Software Selection
  and Data Structures. Online Working Paper - WP3 
• SpatialMSM (static spatial microsimulation model)
• Chin, S-F, Harding, A., Lloyd, R., McNamara, J.,
  Phillips, B. Vu, Q.N. (2005). Spatial
  microsimulation using synthetic small-area
  estimates of income, tax and social security
  benefits. Australasian Journal of Regional
  Studies, Vol 11, No. 3., 303-344
• McNamara, J., Gong, C., Miranti, R., Vidyattama,
  Y., Tanton, R, Harding, A. and Kendig, H. (2009).
  Two Worlds of Ageing Spatial Microsimulation
  Estimates of Small Area Advantage and
  Disadvantage Among Older Australians. Paper
  presented at the 2nd General Conference of the
  International Microsimulation Association,
  Ottawa, Canada, June 8 10, 2009.
• Miranti, R., McNamara, J., Tanton, R. and
  Harding, A. (2008) Poverty at the Local Level
  National and Small Area Poverty Estimates by
  Family Type for Australian in 2006. Paper
  presented at Small Area Estimation Workshop,
  University of Canberra, September 2008
• Tanton, R., Vidyattama, Y, McNamara, J., Vu, Q.N.
  and Harding, A. (2008) Old, Single and Poor
  Using Microsimulation and Microdata to Analyse
  Poverty and the Impact of Policy Change Among
  Older Australians. Paper presented at UNU-WIDER
  Conference on Frontiers of Poverty Analysis,
  Helsinki, 26-27 September 2008.