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ALTERNATIVE MODEL DESIGNS: PROGRAM PARTICIPATION FUNCTIONS AND THE ALLOCATION OF ANNUAL TO 90 MONTHLY VALUES IN TRIM2, MATH, AND HITSM These three static modelsâTRIM2, MATH, and HITSMâshare ma ny features. They also differ in important respects. In this chapter we compare and contrast two components that are part of each model. Our goals are to (1) illustrate the challenging modeling tasks that confront the developers of microsimulation models, given the complexities of the government tax and transfer programs that they cover, the diverse characteristics of the individual decision units to which the programs apply, and the limitations of available databases describing these decision units; (2) illustrate the considerable differences as well as similarities in the approach to common modeling problems that model developers have brought to bear; (3) bring together the limited evidence on the implications of different approaches to common modeling problems; and (4) note problems that appear to warrant further attention and action. The first of the two model components that we examine includes the so-called months routine in each model that is used to allocate annual values for income and employment status to calendar months. The second component includes the functions used by each model to simulate the participation decision for the supplemental security income (SSI), Aid to Families with Dependent Children (AFDC), and food stamp programs. Included in the discussion of modeling program participation are the steps the modelers go through to âcalibrateâ their baseline data files to approximate selected control totals for program recipients obtained from administrative records. The descriptions in this chapter of the models' months and participation routines are based primarily on review of each model's technical documentation, supplemented in some cases by telephone conversations with staff members who maintain the models. The documents we examined for TRIM2 include those of the Urban Institute (1987) and Webb et al. (1982, 1986). For MATH they include Doyle (1989) and Doyle et al. (1990)â the version supplied to us in each case is limited to the modules and variables currently in use by the U.S. Department of Agriculture's Food and Nutrition Service. For HITSM they include Lewin/ICF, Inc. (1988). The descriptions are not necessarily up to date, because some of the routines are being revised. For example, the Urban Institute is currently working on new AFDC and food stamp participation functions. CONVERTING ANNUAL TO MONTHLY VALUES IN TRIM2, MATH, AND HITSM Static microsimulation models such as TRIM2, MATH, and HITSM typically use the March Current Population Survey (CPS) as the primary input database to perform analyses of government transfer programs, such as AFDC and food stamps. The income supplement that is included in the March CPS provides total income amounts by source and summary data on labor force activity during the preceding calendar year for a large sample of households and their members. Transfer programs such as AFDC and food stamps typically use a
ALTERNATIVE MODEL DESIGNS: PROGRAM PARTICIPATION FUNCTIONS AND THE ALLOCATION OF ANNUAL TO 91 MONTHLY VALUES IN TRIM2, MATH, AND HITSM monthly accounting period to determine program eligibility. Hence, a necessary step in preparing March CPS files for microsimulation model use is to convert the annual income and labor force data contained in the March CPS records to monthly values.2 Research on patterns of intrayear income receipt and changes in labor force status suggests that microsimulation estimates of program eligible units will be sensitive to the way in which the annual to monthly income conversion is performed. A number of studies, based on the Seattle and Denver Income Maintenance Experiments, the 1979 Research Panel of the Income Survey Development Program (ISDP), and, more recently, the 1984 Panel of the Survey of Income and Program Participation (SIPP), document the fluctuations in income and labor force status that many individuals experience throughout the year. These fluctuations result in higher poverty rates computed on a monthly or other part-year basis compared with annual rates. Correspondingly, they result in higher rates of eligibility for programs like AFDC and food stamps, which provide support to people experiencing a spell of low income even though their average monthly income based on the entire year is above the program cutoff. (See, for example, David and Fitzgerald, 1987; Doyle, 1984a, 1984b; Lubitz and Carr, 1985; Ruggles, 1988; Ruggles and Williams, 1989; Springs and Allen, 1976; Uhalde, 1976; Williams, 1986.) Recognizing the importance of accurately simulating part-year income flows and labor force activity, developers of the major microsimulation models have progressively refined the calculation of monthly values for these characteristics in their models. Below we describe the procedures that are currently used to perform the annual to monthly conversion in the TRIM2, MATH, and HITSM models. Where information is available, we compare these procedures to those used in prior versions of the models. The discussion proceeds in the order of the model calculations, beginning with how the models determine monthly employment status, then how they allocate earned income, and, finally, how they allocate unearned income. Transfer income from AFDC, SSI, and food stamps is entirely simulated by the models, and, hence, the reported annual income amounts for these programs in the March CPS are not processed by the annual to monthly income conversion routines. One point to note is that none of the models adjusts other characteristics that can also vary during the year. In particular, the models assume that the household and family composition observed in March of the survey year remains unchanged during the previous calendar year over which income and labor force experience are measured. HITSM, in contrast to TRIM2 and MATH, subtracts 2Models that use the new Survey of Income and Program Participation (SIPP) as the primary data input source do not have to perform an annual to monthly income conversion function, because SIPP collects monthly recipiency and amounts for most types of income. To date, however, small sample size and other problems have limited the direct use of SIPP as a microsimulation model database (see Citro, in this volume).