Integrating Micro and Macro Models : Mutual Benefits

Microsimulation modelling of households is an area of research which has seen rapid advances in Australia over recent years, with these models being increasingly used for policy analysis and research in government and academic circles. A relativ ly underdeveloped aspect of this modelling work, however, is the matter of how best to establish linkages between microsimulation models of the household sector and macro economic forecasting/projection models. These linkages are important, not only for reasons of consistency, but also to take account of macro influences on household behaviour and, indeed, of micro influences on aggregate outcomes. This paper sets out possible forms of linkage between micro and macro models, before describing the recursive technique being implemented at NATSEM to link the labour market module of a dynamic microsimulation model with labour force aggregates.