EUROMOD the flexibility to add new countries Holly
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 2 nd April 2009, LSE
2 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 – – user interface functions data documentation • Challenges
3 What is EUROMOD and what is it for? • EUROMOD is a multi-country tax-benefit model for the European Union: unique • National tax-benefit models exist in most of the EU 15 and some of the NMS Ø National models for national analysis without complex changes Ø EUROMOD for national analysis involving complex changes or comparative multicountry analysis or trans national research (EU level) • 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 • The differential effects of “common” reforms • 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) • Any non-commercial research use (academic, govnt. , EC, OECD etc. ), free of charge, subject to input data access permission and EUROMOD acknowledgement
4 Past and present • EUROMOD was originally built (for EU 15) because of difficulties in making national model calculations comparable, funded by a series of European Commission projects (1998 -2004) • It was first constructed very fast in a learning-by-doing way • Lessons learned [flexibility-comparability-ease of use and maintenance] fed into new design applied to 4 NMS (I-CUE FP 6 RIDS project 2004 -8) • A common framework for doing equivalent things across countries – a unified design – common structure and building blocks – disciplined input data specification • Complexity requiring – good documentation including validation – training and support for users – specialist developers + national expertise • A further revision is ongoing now (EC DG-EMPL) to be applied to all EU 27 • The EUROMOD framework has been used for a model for South Africa and is in process for LATINMOD (5 countries)
5 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. • EU 15 plus 4 NMS (EE, PL, HU, SI) • Data either matches policy year or precedes it a few years (then uprated); various datasets
6 Current/future • EUROMODupdate: DG-EMPL funding 2009 -12 – extend EUROMOD to EU 27 – 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
7 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
9 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)
10 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)
12 Operating system
13 Running EUROMOD Check and select countries and data-system combinations Output path: where output files are to be saved
14 Grouping used Control General settings Define dataset 1 Define dataset 2 Parameter names Parameter values for EE-2005 system
15 Policy spine (i. e. order of policies) Function On/off switch
Model components: functions
17 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_Ben. Calc “benefit calculator” • func_Arith. Op is a simple calculator, allowing for the most common arithmetical operations • func_Sched. Calc 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
18 Policies: a real example
19 Policies: a Simpleland example (1)
20 Policies: a Simpleland example (2) • “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
22 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, primar. Y income, e. Xpenditure, 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
23 EUROMOD variables example: child benefits (so far)
Model components: documentation User guides Developer guides Country reports Recipes and research applications See http: //www. iser. essex. ac. uk/research/euromod
25 Challenges • • • 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 27 th April): see http: //jobs. essex. ac. uk or email hollys@essex. ac. uk
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27 Definition of income concepts
28 Definitions of assessment units
29 Uprating factors
30 Variable definitions
- Slides: 30