Old, Single and Poor: Using Microsimulation and Microdata to Analyse Poverty and Impact of Policy Change Among Older Australians

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Abstract

In recent months in Australia there has been extended debate about whether the age pension is sufficiently high to allow older Australians to attain an acceptable standard of living. This paper uses microdata and NATSEM's microsimulation models to examine the spatial distribution of poverty among older single people and to test the likely impact upon national and small area poverty rates of an increase in the single age pension rate. The paper provides an illustration of the usefulness of microsimulation models to policy makers. Changes in a country's tax and transfer systems can have a large effect on incomes, and can be targeted towards increasing incomes for the poor, thus reducing poverty rates. However, governments need an estimate of the extent to which a proposed policy change is likely to affect poverty rates, in order to be able to compare different proposals. Microsimulation models allow this comparison of proposed policies and can provide governments with an appreciation of how much a new policy is likely to cost; how many and what types of low income people will benefit; and the extent of any consequent reduction in the poverty rate. Until recently, microsimulation models have been able to estimate the effects of such changes only at a national or very broad regional level. The National Centre for Social and Economic Modelling (NATSEM) at the University of Canberra in Australia has now linked its tax/transfer microsimulation model (STINMOD) to spatially disaggregated census data, producing a spatial microsimulation model which can be used to identify the neighbourhood effects of policy changes for small areas.

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