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InGRID winter school in ‘Cross country microsimulation’ Day 1

Learn how to use EUROMOD for tax benefit microsimulation in this hands-on training course. Explore model design, running EUROMOD, and statistical presentation tools.

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InGRID winter school in ‘Cross country microsimulation’ Day 1

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  1. InGRIDwinter school in ‘Cross country microsimulation’Day 1 Miko Tammik, Andrea Papini, Kostas Manios & Diego Collado ISER, University of Essex 21-23 November 2018 Course based on EUROMOD v. H1.0+

  2. Outline: Day 1 • Morning (10:00-13:15 with a break at 11:30) • Tax Benefit Microsimulation and EUROMOD • Model Design • The EUROMOD User Interface(UI) • Running EUROMOD • Statistics Presenter tool • Error handling Documentation • Afternoon (14:15-17:15 with a break at 15:45) • Hands-on practice: Exercise 1 • EUROMOD functions and parameters • Hands-on practice: Exercise 2

  3. Outline: Day 2 • Morning (9:30-12:30 with a break at 11:00) • Income lists • EUROMOD Functions and Parameters (cont.) • Hands-on practice: Exercise 3 • EUROMOD Functions and Parameters (cont.) • Afternoon (14:00-17:00 with a break at 15:30) • Hands-on practice: Exercises 4 & 5 • Hands-on practice: Exercise 6

  4. Outline: Day 3 • Morning (9:30-12:30 with a break at 11:00) • Assessment (tax) units in EUROMOD • Hands-on practice: Exercise 7 • Afternoon (14:00-17:00 with a break at 15:30) • Hands-on practice: Exercises 8 & 9 • Presentations by participants • Using EUROMOD after the course • Q&A

  5. Tax-benefit microsimulation and EUROMOD

  6. Microsimulation • Micro: technique using units (ex: individuals, households, firms etc.) instead of aggregate information • Tax-benefit models: household microdata • Simulation: application of an intervention that may change the state or behaviour of units • Tax benefit models: tax and benefit rules  determine entitlements & liabilities • Contribution: estimates results derived from the application of these rules on each unit. • Tax benefit models: impact on disposable income

  7. Why tax-benefit microsimulation? • Population diversity and frequency • Policy complexity: detail and interactions Source: Euromod using EU-SILC 2004

  8. What makes EUROMOD special? Multi-country tax-benefit model for the European Union: unique Harmonised data and simulations Very flexible structure (but scope depends on data available) Tax-benefit modelling language: universal Library of policies

  9. What can EUROMOD do? • Simulate previous, current, future and “potential” tax-benefit rules • Distributive analysis • Budgetary effects • Indicators of work incentives • Complex policy reforms (e.g. revenue-neutral) • Policy swapping • Counterfactual (“what if”) scenarios (e.g. stress test) • EU-wide policy reforms • Tax evasion and non-take-up simulation/calibration (special data ) • Input in other analyses (ex: labour supply models; links with CGE etc.)

  10. Examples-Counterfactual scenarios (I) • To what extent tax-benefit systems support those who became unemployed at the onset of the Great Recession? • Source: Fernandez et al. (2013) Review of Income and Wealth

  11. Examples-Counterfactual scenarios (II) • Poverty effects of child related policy instruments in Poland Source: Levy, Morawski and Myck, Euromod Working Paper 3/08

  12. Examples-Work incentives • Calculate Marginal Effective Tax Rates Source: Jara and Tumino (2013) International Journal of Microsimulation

  13. Examples-EU-wide reforms • Net replacement rates with and without a EU-wide UI benefit Source: Jara & Sutherland (2014) Social Situation Monitor Research Note 3/13

  14. Examples-Behavioural reactions • Calculating labour supply elasticities • Source: Bargain et al. (2013) Journal of Human Resources

  15. EUROMOD in this course • EUROMOD is continuously being developed and improved • Software version: 2.1.0 • Latest public release (H1.0+) • Countries and policies • All 28 EU MS implemented • #of policy years (‘Systems’) implemented varies by country • 2005-2017 : BE, CZ, EE, EL, ES, IT, PL, UK (longest series) • 2011-2017: HR (shortest series) • All consecutive years after the starting year-implemented • Data • EU-SILC/ FRS (UK) • training data • # of datasets available –depends on country

  16. Overview of EUROMOD design

  17. Structure Input microdata (text file in tabular format) Simulations/ Calculations (EURMOD Engine in C++) Output microdata with additional simulated variables (text file in tabular format) Policy parameters (XML files-EUROMOD UI)

  18. EUROMOD input dataset • Generated (using a software package; ex: Stata) from the source micro-data (SILC) • Text file (in tabular format) • 5 types of variables (plus identifiers): • demographic, labour, income, assets, expenditure • Some variables-compulsory (e.g., id, age, weight, incomes) • Harmonised data reference period • No missing values allowed • All income and expenditure –gross values • Incomes & expenditure-at the individual level • Monetary variables reported on (average) monthly basis • Documentation (do-files template , DRD, & EMC)

  19. Variable name convention Names are combination of acronyms: abb** a – type of information (e.g., y: income, x: expenditure) bb – specific for each type a (e.g., y| em: employment, se: self employment) eg. yem: employment income yse: self-employment income ** further bb’s for additional information/detail eg. ysebs: business self-employment income exception id*, eg. idperson, idmother

  20. Structure Input microdata (text file in tabular format) Simulations/ Calculations (EURMOD Engine in C++) Output microdata with additional simulated variables (text file in tabular format) Policy parameters (XML files-EUROMOD UI)

  21. EUROMOD policy parameters • Contain all info about tax-benefit rules • Stored in XML files read by the EUROMOD engine • Common Variables file (VarConfig.xml) • Manipulated via user interface (UI) • UI-stand alone software based on .NET framework • Scope: • Social insurance contributions • Income tax • Non-contributory benefits (means-tested or not) • Contributory unemployment benefits (approximation) • Min wage • Additional policies-country specific!

  22. EUROMODUser Interface

  23. Installation • Requires Microsoft .NET framework files or an Internet connection to download files in the SETUP process • Complete separation between UI and ‘content’ (i.e. XML) files • Only one copy of the UI but can use multiple ‘content’ files • ...but content files must have set structure of folders • Run the Installation Wizard • Set the path to your EUROMOD files • Project path • (if necessary) separate input data and output data paths

  24. EUROMOD folder structure

  25. Linking EUROMOD to content files

  26. User Interface (UI) • Single stand-alone piece of software • Mostly point and click but some hot keys are available (standard and specific) • In-built features that allow for improved user control and guidance • Intuitive!! • Features: • Ribbon bar with tabs • Context menus • IntelliSense (suggestion of parameter values ) • Drag and drop • Bookmarks and comments • Built-in help • Display customization • …much more • New features and capabilities added over time

  27. User Interface (UI) Ribbon bar Country files Run button

  28. Working environment policy systems open country comments policies

  29. Ribbon bar Country tools: - open country to activate buttons -contains options that manipulate the general parameters of a country file -name and acronym -currencies used for parameters in the system and output -which datasets are available and their characteristics -Adding and deleting systems -Viewing options: -search and replace -formatting -bookmarks -Comparing versions -More advanced (import/ export systems, add-ons etc.)

  30. Systems Settings set exchange rate income used for head definition output currency Parameters’ currency

  31. Database settings Policy years for which available characteristics of dataset adding/ deleting folder where micro-data stored if different from default

  32. Ribbon bar • Display: • Control display and formatting • View full spine vs. single policy • Conditional formatting (similar idea to EXCEL) • Bookmarks • Matrix view of income lists • Visualising/ hiding key parameters

  33. Ribbon bar • Administration tools: • adding and deleting countries • accessing and administering the variables file • updating progress: overview of available policy systems and datasets • merging versions • administrating switches • administrating exchange rate and HICP series

  34. EUROMOD Help browse search

  35. Variable Administration

  36. Variables file list of all variables defined in the variables file in alphabetical order name variable is monetary or non-monetary automatic label description of variable for countries where it is used

  37. Adding a variable new empty row; fill in name and monetary

  38. Naming a variable acronyms UI checks validity of name and existence of the variable

  39. Filtering variables select filters

  40. Context menus

  41. Context Menus • Activated by right-clicking • Column headings • Row headings • Function headings/ parameter names • Comments • Intuitive options controlling the respective elements

  42. IntelliSense

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