An overview of binary alignment methods in microsimulation

This chapter presents a simple model that relates the indexation of pensions in conjunction with demographic ageing and the retirement age, to the development of inequality of pensions. Possible future trends in the development of pension adequacy are usually simulated using dynamic microsimulation models. These models are very complex and include many different processes. As an example, the discussion of the simulation results of the Belgian version of the MIDAS model hinges on fundamental relations between demographic ageing, the indexation of pensions to the development of wages, and inequality of pensions and the poverty risk among pensioners. Morrison defines the validation of any model as 'the comparison of the model's results to counterpart values that are known or believed to be correct, or that are consistent with one's assumptions, other trustworthy models' results'. The results of the fertility and mortality routines in the demographic module of MIDAS are aligned to the demographic projections of the AWG.