Bayesian methods for microsimulation models

Abstract

This article proposes Bayesian methods for microsimulation models and for policy evaluations. In particular, the Bayesian Multinomial Logit and the Bayesian Multinomial Mixed Logit models are presented. They are applied to labour-market choices by single females and single males, enriched with EUROMOD microsimu-lated information, to evaluate fiscal policy effects. Estimates using the two Bayesian models are reported and compared to the results stemming from a standard approach to the analysis of the phenomenon under consideration. Improvements in model performances, when Bayesian methods are introduced and when random effects are included, are outlined. Finally, ongoing work, based on nonparametric model extensions and on analysis of work choices by couples is briefly described.