Chapter 2: Hypothetical Models

Microsimulation models can be used with various types of datasets, including the synthetic data constructed based on a number of simple assumptions. Models based on hypothetical data offer useful insights despite their simplicity. In fact, their usefulness stems largely from the simplicity of the approach as it avoids the population complexity. In this chapter we review the development of microsimulation models using hypothetical data.

Modern policy problems increasingly require methodological approaches that are able to capture the complexity of interactions between policies and socio-economic realities, and between policies and the institutional framework. These are further complicated when one takes into account the behavioural, temporal and/or space dimension. Microsimulation models are increasingly used for analysing these problems as they are able to handle a high degree of complexity.