Microeconomic Tax Modelling: Assembling the Database

Abstract

If a microsimulation model is to be used to inform the development of tax policy then one of the most important tasks is to assemble an appropriate database. The quality of output from the model is limited by the accuracy of the data and whether it is representative of the population. And the detail available determines which policy questions can be explored. This chapter examines the problems of data collection and subsequent assembly into a useable database. First the range of intended policy analyses is considered. This is followed by a discussion of the advantages and disadvantages of the two possible sources of data: administrative and household surveys. Finally a number of issues are considered which relate to the processing of the data into the form required for direct use of the model.