model some decisions as joint decisions, but it is hardly practical (or even realistic) to model all decisions in a year as joint. How the model is specified in this respect does not only have implications for the simulations but also for the estimation of the submodels. Models of joint decisions will in general have to be estimated jointly, while models which form a block recursive structure can be estimated recursively.

There are a number of short-comings of the current version of SESIM. One is that there is no proper labor supply model. There are models for labor force participation, unemployment and retirement, but no model that simulates the number of hours worked, and the only model which has economic incentives built into it is the model for old age retirement. We have run experiments with decreased marginal income tax rates, but the effect of such changes on labor supply and retirement is unrealistically small. SESIM would thus become more useful if it could simulate the annual number of hours worked as a function of the budget set each individual faces. However, the labor supply model cannot be a conventional model of Hausman type. Such a model would give too much mobility in hours worked. We need a model which conditions each individual's decision on current and possibly past work hours.

Another short-coming is that there is no functional relationship between health status and death rates. We have experienced that the public expenditures for health care and social care for the elderly depend very much on the death rates. I the life span increases but the age specific health status among the elderly does not improve, we will get an agglomeration of elderly in need of expensive care. It is thus important to understand how health as young and middle aged influences the health status when people reach a high age, and how changes in health influence the age specific death risks. We would also like to understand better how changes in the economic incentives to work longer will influence the health status of the elderly.

A special problem when modeling the utilization of publicly provided services is that there is no regular market for these services. The fees the users pay are kept artificially low and if there is excess demand access is usually regulated in a queuing system. Changes in utilization will then be determined by political decisions to increase supply. The relations we estimate become a mixture of supply and demand although the models usually are specified as if they were demand models. Simulations are then done using the assumption of unchanged policy.

Still another short-coming is the absence of market feedback and macroeconomic feedback. SESIM is a model for the household sector and it does not include any balancing market mechanism. Changes in the macro environment can be fed into the model exogenously but there is no general equilibrium mechanism built into the model. When modeling domestic migration and the demand for housing we considered introducing a price mechanism for owner occupied houses, because the model carries the current migration pattern forward, and it implies that an increasing share of the population will live in the three big cities. This should result in an upward pressure on the real estate prices in the cities, which could counteract the migration flow. Such an increase in real estate prices would also imply a continued shift in wealth from the rural areas to the big cities. For various reasons the introduction of a price mechanism for owner occupied homes was, however, deferred to the future.