Data and Model Cross-validation to Improve Accuracy of Microsimulation Results: Estimates for the Polish Household Budget Survey

Abstract

We conduct detailed analysis of the Polish Household Budget Survey data for the years 2006-2011 with the focus on its representativeness from the point of view of microsimulation analysis. We find important discrepancies between the aggregate data weighted with baseline grossing-up weights and official statistics from other sources. A number of re-weighting exercises is examined from the point of view of the accuracy of microsimulation results. We show that using a combination of variables from the data together with a small number of outcomes from the microsimulation model substantially improves the correspondence of simulation results and administrative data. While demographic re-weighting is neutral from the point of view of income distribution, calibrating the weights to adjust for income sources and tax identifiers significantly increases income inequality. We specify a number of factors which ought to be considered in the choice of weight calibration targets. Data re-weighting can substantially improve the accuracy of microsimulation but it should be used with caution.

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