What is SESIM?
SESIM is a dynamic microsimulation model developed by the Swedish Ministry of Finance in collaboration with researchers from different universities. The project started in 1997, and SESIM’s first mission, an evaluation of the Swedish national system of study allowances, took place in 1998. Since year 2000 the focus has shifted from education to pensions. To evaluate the financial sustainability of the new Swedish pension system is a major purpose of SESIM. This new focus has also implied that SESIM has been developed into a general microsimulation model (MSM) that can be used for a broad set of analyses.
With a constrained budget, economic and distributive targets, pressure from voters, organizations, and other societies, the governments have been forced to become very cautious when implementing reforms in the social and economic policy. Since natural experiments are seldom feasible, different kind of models have become major tools to analyze the impact of different policies. In this context microsimulation models have been developed.
Microsimulation models are well suited for analysis where outcomes across the population are of importance, not only the aggregate, as is the case in macroeconomic models. The models used to be broadly categorized as "static" or "dynamic", although the distinction is not always clear. According to our definition a microsimulation model is "dynamic" if all units, or agents, in the population, and their characteristics are updated over time.
A typical dynamic microsimulation model consists of a sample of a population a given year, where information about age, sex, income, number of children, civil status etc, are available. The models task is then to age the population, and create, or simulate, individual lifepaths. Individuals are usually allowed to work, get married, give birth, divorce, die, and much more depending of the main purpose of the model.
SESIM is a mainstream dynamic MSM in the sense that the variables (events) are updated in a sequence, and the space in time between the updating processes is a year. The start year is 1999 and every individual included in the initial sample then goes through a large number of events, reflecting real life phenomena, like education, marriage, having children, working, retirement etc. Every year the individuals are assigned a status, reflecting their main occupation during the year. Every status is related to a source of income, working gives earnings, retirement’s gives pensions etc. The tax and benefit systems are then applied and after tax income is calculated. If this simulation is repeated for a long time period life-cycle income for individuals can be generated.
A sample of some 300,000 Swedish citizens is used as a simulation base. The data is sampled from the 1999 year wave of LINDA, a large longitudinal dataset. Additional observations are sampled from the set of all individuals living abroad having Swedish pension rights.
In the table below there is a sample of project where Sesim has been used. The publications can be found under “Documentation” tab.