The SISU model is a static microsimulation model. A static model does not take into consideration any possible behavioural effects caused by reforms in legislation (e.g. labour supply) or long-term dynamics. A static simulation model is thus suitable for assessing the immediate and potential effects of different policy alternatives.
The model can be used for both data simulation and fictional data simulation. Fictional data simulation can be used to make simulation for certain types of persons or households generated by the user by calculating taxes, benefits and disposable income for them. With fictional data simulation, the operation of the income transfer and taxation systems can be described easily and swiftly by simulating a person's net income after a certain legislative amendment, for example.
However, the results of fictional data simulation cannot be generalised to a larger part of the population or the whole population. For this purpose, data simulation is used, where calculation is made on individual-level data representing the whole population. It can be used to calculate the effects of legislative amendments or measures made to the income transfer system on income distribution and on the financial position of different population groups and the entire public finance.
The SISU model is composed of the main model that combines the whole income transfer system, and of sub-models that can also be used independently in simulation calculations. Each sub-model thus generally contains the taxes and benefits belonging to the same legislative collection. The SISU model takes the following sections of legislation into account (in brackets years of legislation on which legislation is modelled).
- Income taxation (1980/1990-)
- Real estate taxation of natural persons (2008–)
- Sickness insurance contributions and parental allowance (1982-)
- Unemployment security (1985–)
- National pensions and benefits related to them (1957/1991-)
- Child home care allowance (1985-)
- Child benefits, maternal grant and maintenance allowances (1948-)
- Municipal day care fees (1997–)
- Student financial aid, housing supplement and study grant (1992-)
- General housing allowance (1990–)
- Housing allowance for pensioners (1990–)
- Social assistance (1989-)
Either the service data of income distribution based on a smaller sample (a sample of around 27,000 persons) or large register-based data that better represent the population (a sample of some 800,000 persons) can be used in data simulation.
The basic data used in microsimulation is updated from the base year to the coming years as well. Updating of a basic file refers to bringing both the base year data to the level of the current year and to their forecasting for the coming years (five to six years following the base year). This is necessary as legislation work is often made at least two years ahead of the base year of the basic data.