Discrete-time and Continuous-time Approaches to Dynamic Microsimulation Reconsidered

In this paper the continuous-time competing-risk approach to dynamic microsimulation modelling and approaches based on a discrete-time framework are compared in a systematic way. Besides the basic modelling approaches the possibilities to extend the models to include quantitative and qualitative dependent variables, to use macroeconomic explanatory variables, and to account for dependencies between microunits are discussed. However, most attention is paid to the problems of causality, of simultaneity and of stochastic dependencies between the partial processes in multivariate models. The main conclusion is that a discrete-time framework with comparatively short time periods appears to be best suited for causal modelling in dynamic microsimulation models.