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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 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

Herwig Immervoll

OECD

IZA, Bonn

ISER, University of Essex

background acknowledgements
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
outline
Outline
  • Tax-benefit models
  • What is EUROMOD?
  • Benefits: Illustration of uses
  • The EUROMOD database
  • Data access: experience and status quo
  • Data access: the future
tax benefit models
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
euromod what is it for
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)
euromod an integrated model
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.
uses of euromod examples of recent work
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

3 work incentives distribution of net replacement rates
3. Work incentives:Distribution of Net Replacement Rates

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

the euromod database
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
data access
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)
data access future perspectives
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
euromod information statistics results
EUROMOD:information, statistics, results
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