Microsimulation of business performance

Microsimulation of business performance based on sample survey data is a re latively underdeveloped field, but its application in government economic p olicy formulation is potentially great since it can be used to measure the distributional effects of change rather than just average change. Technique s which account for the dynamic response of businesses to macro level price expectations have recently been developed (Kokic el al,, 1993), These allo w individual level business performance to be forecast from sample survey d ata. In this paper we outline a general methodology for combining these for ecasting techniques with Monte Carlo simulation in order to produce a micro simulation of business performance that accurately captures the true distri butional characteristics of the underlying survey data, Applying this metho dology to Australian farm survey data, we show that these methods may be us ed to forecast the distribution of farm business production and performance within arbitrary subdomains of the surveyed population conditional on a gi ven set of expected commodity price outcomes, The microsimulations reflect both the uncertainty due to climatic variation from one year to the next, w hich in the Australian context depends largely on geographic location, as w ell as the uncertainty of commodity prices.