2. Introduction

MicroWELT is a dynamic microsimulation model developed alongside an international research program studying the distributional effects of four welfare state regimes - Liberal, Universalistic, Conservative, and Mediterranean - in the context of demographic change. While the project focuses on four country examples representing the four welfare state regimes – namely Austria, Finland, the UK, and Spain – the model is designed as a modular simulation platform portable to other countries and extendable for a wide range of applications.

MicroWELT produces detailed population projections going beyond age and sex, specifically addressing education, and the effect of education on socio-demographic behaviors: differential longevity, partnership histories and fertility patterns. The model can reproduce existing population projections in aggregate outcomes but creates realistic life courses adding detail and longitudinal consistency. The model also supports a wide range of what-if analyses and hypothetical scenarios for sensitivity analysis.

MicroWELT integrates cross-sectional and longitudinal accounting (including generational accounts) based on the National Transfer Accounts (NTA) approach. NTAs depict the age profiles of income, public and family transfers, saving and consumption patterns consistent with National Account aggregates reflecting the size and aggregate pattern of welfare state transfers, together with the corresponding private reallocation (Lee and Mason, 2011, Abio et al., 2017). In the Weltransim project we further disaggregate NTA variables by education and family type, allowing for composition effects beyond age. While NTAs are a cross-sectional approach to capture the age dimension, a pseudo-longitudinal interpretation naturally arises in literature. In microsimulation terminology, it is equivalent to a static ageing approach: a re-weighting of the current population by a projected age pattern. In this respect, we complement literature by adding more dimensions, like education change, or changes in childlessness. To balance budgets over time, mechanisms must be defined. Literature has developed a range of approaches which typically ignore differences between welfare state regimes in adapting to demographic change. MicroWELT goes beyond this by a more realistic implementation of the key features of welfare state types.

MicroWELT uses the EUROMOD data as starting population and can thus directly correspond with the EUROMOD database. EUROMOD (Sutherland and Figari, 2013) is used for complementing MicroWELT for detailed distributional analysis within the studied population groups (by age, education and family) today, and to study the sustainability of the current system at future points in time; for this purpose, MicroWELT can project weights. We use EUROMOD also to identify patterns of policy changes and mechanisms to balance budgets typical for the various welfare state regimes.

In this paper we present the MicroWELT model and demonstrate how microsimulation techniques can contribute to research on intergenerational distribution based on NTA data by a case study for Spain. Our analysis first reproduces a set of indicators and projection approaches found in existing literature based on aggregated NTA data. We then dis-aggregate these NTA data by education, school enrolment, and family characteristics. Combined with the corresponding detailed socio-demographic projections of MicroWELT, we explore how findings change when adding detail to projections. For this demonstration, we have selected concepts developed in Lee & Mason (2017) and Lee et.al. (2017). Our analysis illustrates, how disaggregation of NTAs by education and family type impacts projection results on sustainability. We interpret our findings also as rational for the use of microsimulation for NTA based research and – with the MicroWELT model – aim at providing an accessible and versatile tool for projections based on the NTA approach.