Technical Note
Dealing with the oversimulation of taxes and benefits in SOUTHMOD microsimulation models

SOUTHMOD tax-benefit microsimulation models may in some cases oversimulate taxes or benefits, generating greater expenditure, a greater number of beneficiaries, or greater amounts of taxes or taxpayers than reported in administrative data.

Drawing on an example of a social benefit policy in Rwanda, implemented in the RWAMOD model, this technical note shows why such issues can be important in the analysis of tax-benefit policy reforms. The note also shows how oversimulation can be addressed in SOUTHMOD models by downward adjustment of relevant taxes and benefits.