Continuous-Time Labour Activity Transitions in Comparative Microsimulation: Alignment, Validation, and Benchmarking

We present a continuous-time longitudinal microsimulation module for labour activity careers in microWELT, a comparative microsimulation model for socio-demographic projections and policy scenario analysis. Individual careers evolve through transitions among employment, unemployment, non-participation, retirement, and family-related leave using an event-driven waiting-time approach. Transition processes are modelled with piecewise-constant hazard regressions featuring competing risks and explicit duration dependence, enabling realistic spell dynamics - especially for unemployment - that are often difficult to reproduce in discrete-time transition models. A central design feature is alignment to scenario targets for aggregate unemployment and labour force participation. Because microWELT, like most policy microsimulations, do not model market mechanisms, these targets provide macro-level closure for projections and a transparent instrument for counterfactual scenario design. Estimating transition hazards in microWELT is challenging because the underlying comparative survey data typically have limited longitudinal depth and small effective sample sizes, implying higher parameter uncertainty than administrative-history models such as Austria’s microDEMS. To address this, we adapt the microDEMS hazard-based framework and implement two alignment mechanisms. First, simulated aggregates are calibrated to scenario targets for overall unemployment and participation. Second, an optional but pivotal mechanism for microWELT constructs group-specific targets using cross-sectional imputation models defined by categorical characteristics (age group, gender, education, health, and family status). These group targets are reconciled with aggregate constraints via monthly calibration of the cross-sectional model during the simulation. Operationally, alignment exploits simulated waiting times for selected transitions - entries into unemployment and exits from the labour force - to rank individuals by implied event timing and then induces the required number of events by selecting those with the shortest waiting times to meet target margins. All other transitions remain fully continuous-time; only alignment-induced events are implemented on monthly steps to enforce cross-sectional constraints. We evaluate the framework through benchmarking and retrospective validation, comparing careers generated from hazards estimated on administrative versus survey data and assessing fit to recent observed outcomes. Validation focuses on the distribution of unemployment spell durations and heterogeneity in unemployment risk across population groups, quantifying how alignment delivers target consistency while preserving plausible continuous-time dynamics and empirically observed group differences.