of additional eligibility conditions that were not included in our modeling due to a lack of available data (i.e., asset test, as explained below). These unmodeled conditions further restrict the number of households eligible to apply for the program, leading to differences in the number of beneficiaries between the administrative and survey data.

**To estimate the take-up rate, we exploit the difference between the simulated number of potentially eligible households, as estimated from the Survey on Income and Living Conditions (SILC) data, and the total number of beneficiaries, as reported in the administrative data.** In this process, we randomly assign beneficiaries among potential eligible households to match the administrative records. This approach helps us account for the complexities associated with eligibility criteria and take-up rates, allowing for a more comprehensive and nuanced assessment of the MSA and heating allowance programs.

# Microsimulation Techniques

## **Finally, we use microsimulation techniques to evaluate policy scenarios and identify the most significant**

**impact on poverty and inequality reduction.** The simulation of policy reforms involves modeling the impact of policy changes on poverty and inequality indicators by comparing pre-reform vs post-reform income distributions.  This analysis helps policymakers understand the effects of different policy packages on poverty and inequality and identify the most effective interventions to reduce them **.** This approach can help inform the design of more effective and equitable social policies and ensure that resources are targeted to those most need them.

**Changes in social assistance programs, such as the Monthly Social Allowance (MSA) scheme and heating allowance, can impact household and individual welfare through several transmission channels** . These channels can be categorized into three main components: eligibility, transfer size, and program take-up.

- _Eligibility:_ Changes in the eligibility criteria of social assistance programs can directly influence which households or individuals qualify for the benefits. If, for example, the reference value for the MSA is increased, a more significant portion of the population would meet the new eligibility requirements, thus expanding the pool of potential beneficiaries. In the context of the heating allowance and the MSA scheme, specific income thresholds mainly determine eligibility, and altering these thresholds could affect the number of households eligible for this assistance.

- _Transfer Size_ : The transfer size refers to financial assistance provided to eligible households or individuals. When the reference value for a program like the MSA is increased, it leads to larger benefit payments to those who qualify. Each eligible household's transfer size usually remains the same regarding the heating allowance. This factor is essential for assessing the overall impact of social assistance programs since larger transfers can provide more substantial financial relief to recipients by pushing them out of poverty or reducing the depth of poverty, i.e., how close they are to the poverty line.

- _Program Take up_ : Program take up reflects the extent to which eligible individuals or households actually apply for and receive the assistance they are entitled to. A more generous or attractive social assistance program, whether the MSA or the heating allowance, will likely encourage greater take-up. For instance, higher benefits through the MSA may motivate more eligible individuals to enroll in the program. However, as noted, this aspect might not be as relevant for

administrative data, 53.9 million vs. 28.4 million BGN. For the heating allowance, the estimated benefits were 131.3 million vs. 140.2 million BGN in administrative accounts.

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