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MICROSIMULATION AS A TOOL FOR THE EVALUATION OF PUBLIC POLICIES

MICROSIMULATION AS A TOOL FOR THE EVALUATION OF PUBLIC POLICIES. BBVA Foundation workshop 15-16 November 2004 MADRID Aino Salomäki DG: Economic and Financial Affairs European Commission. EX ANTE EVALUATION. DIFFERENT TYPES OF MODELS Static, dynamic

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MICROSIMULATION AS A TOOL FOR THE EVALUATION OF PUBLIC POLICIES

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  1. MICROSIMULATIONAS A TOOL FOR THE EVALUATION OF PUBLIC POLICIES BBVA Foundation workshop 15-16 November 2004 MADRID Aino Salomäki DG: Economic and Financial Affairs European Commission

  2. EX ANTE EVALUATION • DIFFERENT TYPES OF MODELS Static, dynamic Hypothetical, actual data on microunits Rules, behaviour • MS MODELS ARE POWERFOOL PLANNING TOOLS From micro calculations to aggregated results Flexibility (reg. varying objectives and instruments) Reveal policy dilemmas Promote rational and dispassionate debate Transparency, easy to understand • ANALYSE CHANGES AND REFORMS Details in isolation, interactions between and cumulative effects of different measures, total impacts

  3. POLICY PERSPECTIVE • GOAL-ORIENTED ANALYSING TOOL • NATIONAL OBJECTIVES Social and distributional objectives Budgetary costs Labour market behaviour, incentives • EUROPEAN OBJECTIVES Focus on behavioural changes (more employment, more social cohesion) Evaluation of national policies against common objectives National policy changes in the light of EU objectives

  4. NATIONAL TAX-BENEFIT MODELS • Variety of tax and benefit reforms • Illustrate the impacts on hypothetical cases • Total cost estimates • Distributional impacts • Change in indicators (incentives, poverty) • Behavioural impact • Ex-post assessment (isolation) of reform impacts

  5. FINNISH APPLICATIONS • Income tax reforms 1987, 1988, 1989 • Student’s allowance reform 1992 • Capital income tax reform 1993 • Value-added tax reform 1994 • Work incentive reform 1997-98 • Annually: Tax expenditure calculations Evaluation of tax-benefit changes proposed in annual budgets Forecasting tax yields Impact of collective wage bargaining agreements • Positive externality: Expertise in tax-benefit systems

  6. MULTI-NATIONAL MODELS: COMPARISON OF TAX-BENEFIT POLICIES ACROSS COUNTRIES • SEVEN COUNTRIES STUDIES - pioneering policy comparisons • OECD-EU TAX-BENEFIT MODEL - Lisbon strategy and structural indicators • EUROMOD - Invaluable source for the description and formalization of different national policies - Comparison of policies with actual income distribution data

  7. PUBLICATIONS • Employment benefits and social assistance in Seven European countries, the Netherlands 1995 • Income benefits for early exit from the labour market in eight European countries, European Economy, Reports and studies, 1998:3 • Remain or withdraw from the labour market? A comparative study on incentives, European Economy, Economic Papers No. 193, 2003http://europa.eu.int/comm/economy_finance/publications/economic_papers/economicpapers193_en.htm • Indicators of unemployment and low-wage traps (marginal effective tax rates on labour), European Economy, Economic Papers No. 197, 2003http://europa.eu.int/comm/economy_finance/publications/economic_papers/economicpapers197_en.htm ; also on the OECD web-site

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