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Overview

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Overview

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  1. EUROMOD: the tax-benefit microsimulation model for the European UnionHolly SutherlandISER,University of Essex, UK2009 Annual Conference of the Association of Public Policy Analysis and ManagementPre-Conference Workshop  •  An International Policy ExchangeEuropean Measures of Income, Poverty, and Social Exclusion: Recent Developments and Lessons for U.S. Poverty MeasurementWashington DC 4th November 2009

  2. Overview • What is EUROMOD? • How does it relate to the EU Social Inclusion strategy? • What can EUROMOD do? • Academic use of EUROMOD • What else can be done? Future plans for EUROMOD • How to find out more

  3. What is EUROMOD? • A multi-country tax-benefit microsimulation model for the EU: unique • It simulates tax liabilities and welfare benefit entitlements using micro-data on household from survey micro-data (c.f. NBER’s TAXSIM; Urban Institute’s models) • Distributional, budgetary, incentive effects • First round effects; linkage to behavioural/macro models • Highly structured, flexible and transparent • A network of national experts in each country + core team of developers (researchers) • Widening network of users: free for academic and non-commercial use

  4. How does EUROMOD relate to the EU Social Inclusion strategy? • No formal relationship - but EUROMOD analysis can feed into the OMC at every level • EUROMOD updating and enlargement to cover EU27 is currently being funded by the EC DG-Employment, Social Affairs and Equal Opportunities • EUROMOD contributes analysis to projects commissioned by EC policy DGs (e.g. Social Situation Observatory) • National analysis using EUROMOD may feed into National Action Plans • Academic policy-relevant research • It provides a common framework for improving policy understanding and policy learning across countries • Also relevant for other related EU-level policy agendas (employment, “quality” public finance) and therefore for making links between them.

  5. Using EUROMOD for cross-national analysis: what does it do? (1/2) • Provides variables that do not exist in available micro-data • Imputation e.g. net and gross incomes (and taxes) • Customised responses to “what if…?” questions (counterfactuals) • Modelling individual choice: budget constraints (=incomes under a range of conditions) e.g. labour supply responses • Effects of policies on aggregate outcomes e.g. • Particular reforms (e.g. What is the effect on child poverty if child benefit is doubled?) • Policy learning across countries: “policy swapping”

  6. Using EUROMOD for cross-national analysis: what does it do? (2/2) • Specific aspects of taxes or benefits as explanatory variables e.g. • entitlement to benefits, rather than receipt • means-tested vs. contributory benefits • Current or prospective policies rather than those from the past • Comparability across countries • Huge range of options to maximise flexibility • Defining variables that improve comparisons e.g. • net social benefits • child contingent payments • indicators of work incentives • Examples for 19 countries; various years 2001-5.

  7. Composition of household disposable income whole population

  8. Composition of household disposable income bottom decile group

  9. Child contingent payments per child by decile group% of national per capita disposable income Source: EUROMOD

  10. Incentives to work (METRs) Source: EUROMOD

  11. Academic use of EUROMOD • Examples • F. Figari, H. Immervoll, H. Levy, H. Sutherland, Inequalities within couples in Europe: market incomes and the role of taxes and benefits, Eastern Economic Journal, forthcoming. • A. Paulus, A. Peichl, Effects of flat tax reforms in Western Europe, Journal of Policy Modeling, 2009. • O. Bargain, T. Callan, Analysing the effects of tax-benefit reforms on income distribution: a decomposition approach Journal of Economic Inequality, 2008. • H. Immervoll, H.J. Kleven, C.T. Kreiner, E. Saez, Welfare Reform in Europe: A Micro-simulation Analysis, Economic Journal, 2007. • H. Levy, C. Lietz, H. Sutherland, Swapping Policies: Alternative Tax-Benefit Strategies to Support Children in Austria, Spain and the UK, Journal of Social Policy 2007. • Building a user community • Working Papers, “Recipes”, work-in-progress conferences

  12. Future plans for EUROMOD: what else can be done? • A new version of EUROMOD • enlarge from 19 to 27 countries • regular updating of policy rules • Eurostat EU-SILC database (regularly updated) • 3-year project 2009-12 • And…? • indirect taxes • non-cash incomes • childcare policies • General framework can be used to shortcut the process of building comparable models for any country (e.g. SAMOD for South Africa) • Towards WORLDmod?

  13. Further information on EUROMOD Web site: http://www.iser.essex.ac.uk/research/euromod • Country Reports • Recipes and user documentation • Working Papers • Courses • Projects • Statistics

  14. Challenges • Non take-up of benefits and tax evasion • Data issues • Management and updating

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