The Mimosi model

CPB uses the Mimosi model for various purposes. For instance, the model is used to simulate household disposable income. This enables estimates to be made of purchasing power, poverty, affordability, distributional effects of policies and marginal pressures. The model is also used to make budgetary estimates of measures in the areas of taxation, allowances and social security.

Why do we use Mimosi?

The most notable use of Mimosi is to estimate the development of purchasing power as a result of continuing and changing policies as well as general economic conditions. Purchasing power is an issue that concerns everyone. It is therefore important to be able to estimate how changes in taxation, social security, allowances and general economic developments affect household disposable incomes. Mimosi can also be used to calculate the costs or benefits of policy changes. This facilitates the informed assessment of purchasing power support in relation to balanced fiscal policy.

What do we use Mimosi for?

Mimosi is used extensively by CPB, including for estimates (Macro Economic Outlook (MEV) and Central Economic Plan (CEP)), for research projects and for calculating the effects of government policies and policy alternatives of political parties or departments. Results of the Mimosi model are also used by CPB in other models when making estimates and calculations, such as Taxus, EMU, ZOEM and Saffier.

Mimosi was developed by CPB. The Ministry of Social Affairs and Employment and the Ministry of Finance use Mimosi independently to support their political decision-making.

How Mimosi is designed

Mimosi is based on microsimulation. This type of modelling simulates the income of a large group of individual households based on their characteristics, policies and economic conditions. It offers the possibility of analysing the impact of economic developments or new policies for those individual households by running different simulations for selected groups of them in the model. Where this is done for a large number of individual persons or households that together form a representative sample, the results of all the individuals combined provide a picture of the effects for the population of the Netherlands as a whole. This allows us to make the average development of purchasing power, as well as the distribution in that development, visible. 

CBS data based on the Income Panel Survey (IPO) are used for the microsimulation. The IPO concerns a representative sample of almost 100,000 core persons and their household members (a total of 250,000 persons). Within that dataset, all the items of income and assets of the individuals and households with regard to, for instance, wages, benefits, taxes, tax credits, tax-deductible items, allowances, etc. are known. Based on these items of income and assets as well as the parameters of the system of taxation, social security and allowances, it is possible to simulate the entire gross-net trajectory for all the households and individuals in the dataset. Based on the relevant social security schemes, payroll and income taxes, allowances and other collective arrangements, amounts are added to and subtracted from gross income in this trajectory, so that an individual’s disposable income eventually remains. Mimosi also takes various general economic developments, such as inflation, contractual wage increases and pension indexations into account. 

Mimosi assumes a static situation in respect of individuals and households: there are no changes in the personal circumstances of households and individuals. This means, for example, that they do not cohabit, get divorced, age, have children, lose or get a job or receive a bonus.

What are we not able to do with Mimosi?

Mimosi is a model that can be used to answer many different types of questions. But there are also questions in the areas of purchasing power and budgetary estimates for which Mimosi is not suitable. For example, we cannot estimate dynamic purchasing power, which takes account of changes in the personal circumstances of households and individuals. Although dynamic purchasing power figures are a more accurate reflection of reality, the results are less easy to interpret. Mimosi is used for the purpose of estimating the effects of policies and general economic developments. If personal changes are taken into account, the estimates become obscured by developments that bear little or no relation to policy. Furthermore, these kinds of personal transitions are difficult to predict at the micro level. The static nature of the model also means that the impact of behavioural changes is not taken into account in purchasing power and budgetary revenues.

When estimating purchasing power, we only take average changes in wages, pensions and inflation into account. We do this to get a sense of the impact of general economic trends on purchasing power. Besides not taking household dynamics and behavioural changes into account, the differences, which may sometimes be sizeable, between households in terms of inflation or pension indexation, for example, mean that the results from the Mimosi model are not suitable for comparison with an individual household’s budget.