NiReMS: a regional model at household level combining spatial econometrics with dynamic microsimulation

The heterogeneous spatial and individual impacts of the Great Recession, Brexit and Covid-19 have generated an important challenge for macroeconomic and regional/spatial modellers to consider greater integration of their approaches. Focusing on agent heterogeneity at the NUTS-1 level, we propose NiReMS – a synthesis of dynamic microsimulation with a spatial regional macroeconometric model. The model gives regional macro projections while allowing for household level inference. To showcase the model, we explore the impact of terminating enhanced Universal Credit (UC) early and show that it led to more households consuming less. Importantly, the proposed framework shows that the impact is not equal across the regions of the UK: low asset households in the North East, Wales, and Northern Ireland were hit particularly hard.