Dypes: a dynamic microsimulation tool to analyze pension systems
Advantages
- Flexibility given the modular structure.
- The model accounts for individuals reactions to changes in financial incentives to retire. It is therefore a tool particularly suitable for analysing reform effects focusing in different population groups.
- The main events are modelled in continuous time.
- Dypes uses a starting population sample to better feet with the reality.
Access
Dypes©UB is available under different licensing models.
Reference
AVCRI274
Contact
Isabel Durán
Email: iduran@fbg.ub.ed
Tel: +34 934 037 281
Dypes: a dynamic microsimulation tool to analyze pension systems
Executive summary
A research group, with wide experience on pensions and microsimulation, has developed a dynamic microsimulation model to analyse the performance of pensions systems in the long term.
Introduction
The majority of developed countries are facing a population aging process that may threat the sustainability of their social protection programmes. In a context of rising long-term care costs and increasing pension’s bill, the concern about the necessary reforms to make the system sustainable is fully justified. Reform proposals vary from a complete restructuring of the system – like a switch to a true or to a notional capitalisation system – to marginal adjustments of the legal parameters of the current system.
The dynamic microsimulation model Dypes is a useful tool to analyse the effects of pension system reforms. The flexibility of the model allows to focus in different aspects of the reforms:
- Consider both the system sustainability and pension level adequacy,
- Looking at the differential impact of changes in financial incentives by population groups (males and females and different working careers).
The first issues conform the two main pillars of the European Commission concerns in terms of pension’s policies. The second can be useful to design appropriate responses from the private sector.
Description
Dypes simulates in continuous time the main events of individual’s life up to 2060: education, labour entry, labour market transitions, unemployment spells and, finally, retirement and mortality.
It employs available information on the probabilities of each transition by population groups and –unlike other microsimulation models- it uses a starting population sample with information on working careers to improve simulation results.
Dypes also incorporates advanced behavioural modules to capture individual’s reactions to both business cycle fluctuations and changes in retirement incentives.
Current stage of development
Dypes is currently working both in time based and case based version. It has been used to analyze the effects of the 2011 and 2013 reforms of the Spanish pension system.