CeMPA has opened a new three-year PhD position, sponsored by the UK Department of Work and Pensions (DWP), for research on dynamic microsimulation modelling of the UK economy. This is a unique opportunity to carry out research that will (1) significantly advance the academic field of dynamic microsimulation, and (2) be of immediate policy relevance, by contributing to some of the Government’s biggest model development challenges in DWP, improving approaches that underpin multi £bn forecasts of social security benefits expenditure. The successful candidate will engage regularly with both academics and Government officials, and have an opportunity to develop a range of analytical, technical and broader skills.

While the successful candidate will be able to bring forward his or her own research agenda within the object of the call, CeMPA and DWP propose the following areas of research:

Area 1 – Modelling of flow assumptions and alignment

Alignment to external targets is widely used in dynamic microsimulation modelling, although it is a highly contentious issue methodologically. There are pros and cons of doing it, and conditions which should be respected. Moreover, there are a number of alignment methods available, with different properties and performance. Despite its importance however, academic research on alignment is scant, and the issue often remains confined to practical considerations in model validation.

Area 2 – Modelling of earnings and nowcasting

Nowcasting is the prediction of the present, the very near future, and the very recent past state of an economic indicator. In microsimulation modelling, nowcasting is often necessary to update the micro evidence on which the models are based, which generally comes from individual or household surveys and is therefore generally a few years old. This is all the more important at times of rapid labour market dynamics, as those brought about by the Covid-19 pandemic. Nowcasting needs then to be blended into external projections, extending more into the future, at a more aggregate level. These projections, in the UK, are officially produced by the Office of Budget Responsibility (OBR). OBR assumptions on earnings growth cover the whole population and it has been a matter of frequent debate (and changing opinion at the OBR over time) over what the relationship between earnings growth in the population and in the benefit system should be. This evidence gap remains to be filled.

Area 3 – Modelling of work incentives and labour supply

Labour supply responses to the incentives brought about by the tax and benefit system are crucial in models that wish to integrate a detailed fiscal perspective in a dynamic framework. The nature of dynamic microsimulation models however brings in additional challenges to those faced by the micro-econometric literature on the topic, as labour supply responses need to be computed for every simulated individual given their personal circumstances, and not only for some carefully selected categories (e.g. prime-age males).

Currently, work incentives are only factored into the DWP model indirectly through the data-driven flow and transition rates used.  While research area 1 will hopefully allow to establish a technical means of adjusting outcomes for changing economic determinants, there is scope for improving our understanding of the economic drivers of behaviour.

Deadline for applications is October 28, 2022. Interviews will take place the week of November 14, 2022. More information is available here.