Refining the simulation of social assistance with monthly income data and calibration
- Finnish Institute for Health and Welfare (THL), Finland
Figures
Over- and undercoverage of social assistance recipients using different simulation methods in 2022, and root mean square error compared to actual data.
(a-b) Distribution of social assistance recipient households by income decile and number of benefit months according to data, simulation with official model, and simulation with refined model.
The impact of the 2024-2025 reforms on total disposable income by income decile, simulated with the official and the refined model.
Tables
Sources of error in simulating social assistance by the direction of the bias.
| Undersimulation | Oversimulation | Indefinite |
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Methods for monthly allocation by income item.
| Income item | Allocation to monthly level |
|---|---|
| Unemployment benefits | Observed at monthly level |
| Part-time labour income | Observed at monthly level |
| Study grants and loans | Estimated based on additional information |
| Sickness and parental benefits | Estimated based on additional information |
| Full-time labour income | Estimated based on additional information |
| Pensions | Estimated based on additional information |
| Child benefits | Estimated based on additional information |
| Capital income | Annual average (no allocation) |
| Taxes | Annual tax rate (applied to monthly income) |
| General housing allowance | Allocated through simulation |
| Social assistance | Allocated through simulation |
Differences between results from the refined model and the official model compared to data reference values in 2022.
| Data | Difference with data | Difference, calibrated vs. official model | |||
|---|---|---|---|---|---|
| Official model | Calibrated model | ||||
| Social assistance | Expenditure, M€ | 670 | +38 % | 0 % | -28 % |
| Households | 231 000 | -3 % | 0 % | +2 % | |
| Indiviudals | 392 000 | -14 % | -6 % | +9 % | |
| General housing allowance | Expenditure, M€ | 1 576 | -4 % | +3 % | +7 % |
| Households | 504 000 | -15 % | +2 % | +21 % | |
| Gini | 29.2 | -0.2 | -0.1 | +0.1 | |
| Median income, eqv. €/yr | 27 614 | -202 | -179 | +23 | |
| AROP rate (60), % | 13.6 | +0.4 | +0.3 | -0.1 | |
| AROP rate (50), % | 6.8 | -0.2 | 0.0 | +0.2 | |
| AROP gap (60), % | 16.7 | -1.3 | -0.6 | +0.7 | |
| AROP gap (50), % | 21.2 | -7.2 | -5.5 | +1.7 | |
| AROP rate (60), age less than 18, % | 11.9 | +0.8 | +0.2 | -0.6 | |
| AROP rate (60), age 65+, % | 14.0 | -0.2 | -0.1 | +0.1 | |
| Income share of the 1st decile, % | 3.5 | +0.4 | +0.2 | -0.2 | |
The estimated effects of the reform on benefit expenditure and distributional indicators with the official and refined model.
| Official model | Refined model | Sensitivity test: Change of overcoverage rate | |||
|---|---|---|---|---|---|
| +20% | -20% | ||||
| Social assistance | Expenditure, M€ | +313 | +182 | +122 | +242 |
| Households (1000) | +50 | +26 | +8 | +43 | |
| Individuals (1000) | +81 | +37 | +12 | +62 | |
| Housing allowance | Expenditure, M€ | -885 | -972 | -972 | -972 |
| Households (1000) | -218 | -251 | -251 | -251 | |
| Gini index | +0,4 | +0,6 | +0,6 | +0,6 | |
| Median income, €/yr | +292 | +270 | +269 | +271 | |
| AROP rate, % | Total pop (60) | +1,7 | +1,9 | +2,0 | +1,9 |
| Total pop (50) | +1,3 | +1,8 | +1,9 | +1,8 | |
| Age less than 18 (60) | +1,7 | +2,7 | +2,7 | +2,6 | |
| Age 65+ (60) | +0,4 | +0,4 | +0,4 | +0,4 | |
| AROP gap, % | Total pop (60) | +1,2 | +2,6 | +2,7 | +2,5 |
| Income share of the 1st decile, % | -0,2 | -0,3 | -0,3 | -0,3 | |
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Note: In the sensitivity analysis the overcoverage rate after the reform is assumed to be 20% higher or lower than in the reference-year calibration. The increased overcoverage reflects a scenario where oversimulation rises, for example due to unobserved wealth among new recipients, while the reduced overcoverage can reflect higher take-up if increased benefit amounts spur higher claiming probabilities.
Coefficients of the logistic regression model analysing overcoverage (1/0) among the simulated social assistance (SA) recipients.
| β | p | |
|---|---|---|
| Intercept | 4.60 | 0.00 |
| Simulated months of SA (1–12) | -0.12 | 0.00 |
| SA as % of hh income, avg per month | -0.02 | 0.00 |
| Socio-economic position (ref=unknown) | ||
| Upper-level office workers | 0.81 | 0.00 |
| Lower-level office workers | 0.23 | 0.00 |
| Employees | -0.44 | 0.00 |
| Students | 0.44 | 0.25 |
| Pensioners | -1.01 | 0.00 |
| Other | -1.17 | 0.00 |
| Household life stage (ref=single parents) | ||
| Single, less than 35 years | -0.14 | 0.00 |
| Single, 35–64 years | 0.45 | 0.00 |
| Single, 65+ years | -0.20 | 0.00 |
| Couple, less than 35 years | 0.25 | 0.00 |
| Couple 35–64 years | 0.19 | 0.00 |
| Couple, 65+ years | 0.10 | 0.56 |
| Family with 2 parents and children | -0.03 | 0.00 |
| Other | -0.24 | 0.00 |
| Disposable income (ref=more than 7500 €/year) | ||
| Less than 1500 € | 3.49 | 0.00 |
| 1500–4500 € | 0.24 | 0.00 |
| 4500–7500 € | -1.00 | 0.00 |
| Income decile (ref=I) | ||
| II | -0.46 | 0.00 |
| III | -0.51 | 0.00 |
| IV | -0.33 | 0.00 |
| V-X | 0.67 | 0.00 |
| Migrated during the data year (0/1) | 0.48 | 0.00 |
| Institutionalized (0/1) | 2.11 | 0.00 |
| Debt for execution (0/1) | -0.69 | 0.00 |
| Immigrant (0/1) | -0.50 | 0.00 |
| Rental income (0/1) | 2.38 | 0.00 |
| Extra adults in the household (0/1) | -0.49 | 0.00 |
Data and code availability
Code is available by request. Access to microdata requires pertinent data licenses from Finnish Social and Health Data Permit Authority (Findata).