A microsimulation model to measure the impact of the economic crisis on household income

Data on household living conditions that would enable measurement of the impact of the crisis on income and health are only available after a delay of more than one year. Therefore, they prevent an early assessment of the impact of economic shocks. In order to get this more timely estimation, we propose a nowcasting approach by using different sources of data and by taking into account a whole set of potential transitions across the different statuses of the labour market and the related changes in income. To validate this microsimulation method, we apply it to Italy, a country that has been deeply affected by the crisis. Data have been drawn from the European Statistics on Income and Living Conditions Survey for Italy (IT SILC) and from the Labour Force Survey for Italy. The latter data allow us to take into account the changes in the labour market status of individuals due to economic shocks. The validation results support the capability of the model to simulate the effect of the cycle before actual data on income are available therefore enabling the design of effective policies to sustain household income.