Transcript AIM-AP projects 1 and 2

EUROMOD: the flexibility to “add new
countries”
Holly Sutherland
Institute for Social and Economic Research, University of Essex
(with Francesco Figari, Horacio Levy, Christine Lietz and Alari Paulus)
ESRC/BSPS Microsimulation seminar 2nd April 2009, LSE
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Outline
• What is EUROMOD and what is it for?
• Context: past, present and future
• Model structure
– and the process of model construction/maintenance
• Model components
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user interface
functions
data
documentation
• Challenges
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What is EUROMOD and what is it for?
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EUROMOD is a multi-country tax-benefit model for the European Union: unique
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National tax-benefit models exist in most of the EU15 and some of the NMS
 National models for national analysis without complex changes
 EUROMOD for national analysis involving complex changes or comparative multicountry analysis or trans national research (EU level)
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Cross-national comparisons
– equivalent outputs with different inputs
– huge range of options maximise flexibility
– defining variables that improve comparability/equivalence e.g. net social benefits, child
contingent payments, indicators of work incentives
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The differential effects of “common” reforms
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Policy learning across countries: “policy swapping”
─ Understanding the effects of tax-benefit systems on different populations
─ “Borrowing” policies that seem effective in one country (e.g. UK WFTC)
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Any non-commercial research use (academic, govnt., EC, OECD etc.), free of
charge, subject to input data access permission and EUROMOD acknowledgement
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Past and present
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EUROMOD was originally built (for EU15) because of difficulties in making
national model calculations comparable, funded by a series of European
Commission projects (1998-2004)
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It was first constructed very fast in a learning-by-doing way
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Lessons learned [flexibility-comparability-ease of use and maintenance] fed into
new design applied to 4 NMS (I-CUE FP6 RIDS project 2004-8)
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A common framework for doing equivalent things across countries
– a unified design
– common structure and building blocks
– disciplined input data specification
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Complexity requiring
– good documentation including validation
– training and support for users
– specialist developers + national expertise
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A further revision is ongoing now (EC DG-EMPL) to be applied to all EU27
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The EUROMOD framework has been used for a model for South Africa and is in
process for LATINMOD (5 countries)
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Current status
• Direct taxes and cash benefits only; no indirect taxes or noncash benefits; most contributory benefits and pensions are not
fully simulated
• Standard model: static calculations; benefit take up is assumed
to be 100%; no tax evasion.
• EU15 plus 4 NMS (EE, PL, HU, SI)
Policy
EE HU PL SI
year
1998
2001
2003
2005 + + + +
EL ES BE DE LU NL AT PT FI UK DK IE FR IT SE
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• Data either matches policy year or precedes it a few years
(then uprated); various datasets
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Current/future
• EUROMODupdate: DG-EMPL funding 2009-12
– extend EUROMOD to EU27
– re-base using the EU-SILC (Eurostat UDB) as the input data
– update policies to the EU-SILC data year + a very recent year
– re-write the EU-15 using the revised framework
– encourage the use of EUROMOD for policy relevant research by all relevant
people/bodies
– establish a regular (annual) programme of updating (data and policies)
– transfer as much of the maintenance as possible to national teams
– train more people to use the model
• Links to other models/developments
– indirect tax
– labour supply
– non-cash incomes
– benefit take-up and tax evasion
– new spin off models for non EU countries
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What are the key requirements?
• All country-specific (data or policy) features should be
parameterised and not in the code
• Generic functions and variable definitions should work across
countries (“building blocks” or a common “language”)
• Transparency, and a “getting started” mode of working for
both developers and model users
Model structure
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EUROMOD structure
Original data
Policy rules
(agreed with
national teams)
(reported by
national teams)
Model input data
Parameters
(individual-level data
prepared by national
teams,text files)
(Excel files)
Code
(written and
compiled in C++)
Micro output data
e.g., net income
(text files)
Specific analysis
(e.g., Stata, SPSS)
Tools for
basic analysis
(Excel files/macros)
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EUROMOD parameter files
Information about the input dataset and tax-benefit system the model needs for
producing its output is stored in an Excel file (using different sheets), one set
for each country:
– CONTROL → datasets definitions and general settings
– POLICY SPINE → order of policy simulations
– POLICIES → rules of tax/benefit instruments decomposed into elements (i.e.
functions)
– TAX UNITS → definitions of assessment units
– INCOME LISTS → definitions of income concepts
– UPDATING FACTORS → to update input data monetary values to the system
year
An additional common file (Variables.xls) defines all the variables used in the
model.
Model components:
user interface (operating system)
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Operating system
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Running EUROMOD
Check and select countries and data-system combinations
Output path: where output files are to be saved
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Grouping
used
Control
General
settings
Define
dataset 1
Define
dataset 2
Parameter
names
Parameter
values for
EE-2005
system
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Policy spine (i.e. order of policies)
Function
On/off
switch
Model components:
functions
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Policy functions (just 6 of them)
• func_Elig “eligibility function” - most frequently used for
determining the eligibility for receiving benefits; also liability
for paying taxes and evaluating other conditions
• func_BenCalc “benefit calculator”
• func_ArithOp is a simple calculator, allowing for the most
common arithmetical operations
• func_SchedCalc implementation of the most common (tax)
schedules
• func_Allocate (re)allocates amounts (incomes, benefits, taxes)
between members of assessment units
• func_Min and func_Max are simple minimum and maximum
calculators
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Policies: a real example
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Policies: a Simpleland example (1)
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Policies: a Simpleland example (2)
sys_par_name
sys_reserved sys_first_sys
sys_first_par
func_Elig
elig_cond
TAX_UNIT
func_ArithOp
who_must_be_elig
formula
output_var
TAX_UNIT
sys_end_par
SL_demo
SL_reform sys_end_sys
Child Benefit
on
off
eligibility rule
{dag < 3}
{dag < 3}
in the base scenario there must be
sben_family_slsben_family_sl at least one child aged younger than three
on
on
benefit calculation
one
n/a
100#m
50#m
the benefit amounts to 100/50 € per month
bch_s
bch_s
sben_family_slsben_family_sl
• “copy” (using EUROMOD tool to add a system) and edit new columns to
create reforms to existing policies
• copy and edit policies (groups of rows) to create new policies or “swap”
policies across countries
• use the add country EUROMOD tool and copy/edit policies for new
countries
Model components:
input data and output variables
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EUROMOD input database
• Definition and names of EUROMOD variables (input and
output) follow a standardised approach
– list of acronyms that, put together in a predetermined order, build a
variable name
• Two classes of acronyms, ordered hierarchically:
– Class 1: IDentification number, Asset, Labour market, Demographic,
System, primarY income, eXpenditure, Benefit, Pension, Taxes and
contribution, in Kind
– Class 2: two characters to identify specific information for the subject
• more than one acronym can be used
• many categories of acronym, to be used as necessary
– Simulated variables end with _s, e.g. bch and bch_s
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EUROMOD variables example: child benefits (so far)
VARIABLES
Variable
Name
Automatic
Label
sys_var_name
sys_label
bch
bch_s
bch00
bch00_s
bchab
bchba
bchba_s
bchdi_s
bchdied_s
bched_s
bchlg_s
bchlp
bchlp_s
bchlp00_s
bchmt_s
bchnm_s
bchot
bchpl
bchunlp
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
benefit
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child
child
child
child
child
child
child
child
child
child
child
child
child
child
child
child
child
child
child
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simulated
main/basic
main/basic : simulated
abroad
birth/adoption
birth/adoption : simulated
disability-invalidity : simulated
disability-invalidity : education : simulated
education : simulated
large family : simulated
lone parent
lone parent : simulated
lone parent : main/basic : simulated
means-tested : simulated
not means-tested : simulated
other
parental leave
unemployment : lone parent
IT
EE
HU
child allowances -(total)
child allowance (lapsetoetus)
child allowance (lapsetoetus)
child allowance abroad
childbirth allowance
(sünnitoetus
childbirth allowance
(sünnitoetus
school allowance- (koolitoetus)
large family allowance
(kolme- ja
single parent child
- allowance (ük
regular child pro
family allowance
Child benefit (Assegno
per famiglia
- con almeno 3
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Model components:
documentation
User guides
Developer guides
Country reports
Recipes and research applications
See http://www.iser.essex.ac.uk/research/euromod
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Challenges
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Input data access, quality, comparability and suitability
Enlarging and nurturing the user community
Managing model revisions and transitions
IP issues related to spin-off models
Maintaining the model developer team
– we are recruiting (closing date 27th April): see http://jobs.essex.ac.uk or
email [email protected]
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Definition of income concepts
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Definitions of assessment units
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Uprating factors
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Variable definitions