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How do public policies affect individual households? Design and uses of EUROMOD: an EU-wide tax/benefit model PowerPoint PPT Presentation

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How do public policies affect individual households? Design and uses of EUROMOD: an EU-wide tax/benefit model. Herwig Immervoll OECD IZA, Bonn ISER, University of Essex. Background & acknowledgements.

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How do public policies affect individual households? Design and uses of EUROMOD: an EU-wide tax/benefit model

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How do public policies affect individual households?Design and uses of EUROMOD: an EU-wide tax/benefit model

Herwig Immervoll


IZA, Bonn

ISER, University of Essex

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Background & acknowledgements

  • EUROMOD: Consortium of academics and government researchers in most EU Member States: currently around 20 institutions; 50+ researchers

  • Model building based on a number of EU-funded research projects, starting in mid-1990’s

  • Co-ordinated by Holly Sutherland(ISER, University of Essex)

  • Model applications at national and international level, including for OECD

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  • Tax-benefit models

  • What is EUROMOD?

  • Benefits: Illustration of uses

  • The EUROMOD database

  • Data access: experience and status quo

  • Data access: the future

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Tax-benefit models

  • Calculate cash benefits and taxes and contributions for a (large) sample of households, representative of the population

  • Focus on policies that can be straightforwardly assigned a monetary value.

  • The main output from the model is household income.

  • Representative and results for:

    • aggregates (budgetary effects)

    • distributions (poverty and inequality indicators)

    • individual families (real and hypothetical)

    • indicators of incentives (e.g. net replacement rates)

  • and changesin these for alternative scenarios

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EUROMOD - what is it for?

  • EU-15, currently being extended to New Member States

  • Built with comparabilityas the main objective

  • Cross-country comparisons

    • analysis of existing policies

    • “policy swapping”

  • Common reforms or reforms with common objectives

  • National reforms with an EU perspective

  • National analysis for countries without national models

  • “What if” questions about

    • existing policy instruments and sub-components

    • changes and reforms (actual, proposed, hypothetical scenarios)

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EUROMOD - an integrated model

  • Original incomes (mainly market income) taken from micro-data.

  • Tax liabilities and benefit entitlements are simulated using detailed policy rules of a particular year

  • … and re-simulated for each new scenario

  • Aim is to replicate individual tax liabilities and benefit entitlements that tax authorities and benefit agencies would determine.

  • Requires detailed information about market incomes, family circumstances and labour market status for each individual.

  •  good-quality micro-data is essential.

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Uses of EUROMOD:Examples of recent work

  • Redistribution of existing tax and transfer policies in EU-15

  • Evaluating alternative policy scenarios: How can more generous transfers help to reduce child poverty? How much does it cost?

  • Work incentives: What part of family income is maintained when becoming unemployed?

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1. Equalising effect of tax-benefit systems (% change in Gini coefficient)

Source: EUROMOD (Immervoll et al., 2006)

Countries are ranked in descending order of inequality

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1. (continued)Equalising effect of different policies

Source: EUROMOD (Immervoll et al., 2006)

Countries are ranked in descending order of inequality

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2. The spending - child poverty trade-offEffects of increasing payments per child

Source: EUROMODWork in progress: Levy, Lietz, Sutherland

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3. Work incentives:Distribution of Net Replacement Rates

Source: EUROMOD (Immervoll, O’Donoghue, 2003)

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The EUROMOD database

  • Representative household micro-data for each country

  • Fully documented and transparentdata sources; sampling; non-response

  • Partly harmonised to ensure comparability:variable names & definitions EUROMOD “core variables” for all countries

  • But different sources and levels of detail “best available” data in each country

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Data access

  • Separate agreements with each data provider; different access conditions

  • Conditions for accessing full database: go by most restrictive agreement

  • Selective use of particular data sets possible

  • Users need to have or obtain access permissions individually from each original data provider

  • Or as part of a project consortium(e.g. EU-financed FP5 project “MICRESA”: Micro-level Analysis of the European Social Agenda)

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Data access: future perspectives

  • Long-term access negotiated on behalf of all users

  • Secure remote access:promote access and ensure compliance

  • Benefit from experience of existing facilities (UKDA, LIS, DIW)

  • Customisable: Scope of RA would reflect access conditions stipulated by each data provider

  • EU SILC in addition to national databases+ many users will have existing access permission+ one set of access conditions for all countries

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EUROMOD:information, statistics, results



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