Autumn School Dynamic MSM16-18 November 2015 | L-Esch-sur-Alzette Slide 1 Note Combining LIAM2 and...

Autumn School Dynamic MSM 16-18 November 2015 | L-Esch-sur-Alzette

Slide 1

NoteCombining LIAM2 and EUROMOD:

a (useful?) possibility


Slide 2

Given complexity of microsimulation models, hence development costs, it is often useful to raise the question of a combination of tools rather than parallel compositions

This is particularly true as soon as the static model EUROMOD (Sutherland et al.) and dynamic models built from LIAM2 (O’Donoghue et al., Dekkers et al.) are considered

Their internal structure, including variables needed for simulation, and their technical implementation show similarities that make an interaction a priori promising

We explain how it is feasible, emphasize limits of the exercise + example of application if time left

(*) Liégeois Ph. and G. Dekkers, (2014), Combining EUROMOD and LIAM Tools for the Development of Dynamic Cross-sectional Microsimulation Models : a Sneak Preview, in G. Dekkers, M. Keegan and C. O’Donoghue (eds), New Pathway in Microsimulation, Burlington : Ashgate

Motivating the combination (*)


Slide 3

What’s at stake ?

Gross Income

variationsModifications of Employment

status

Demographic changes

Reforms of Tax-benefit

systems

Macro adjustments

EUROMOD

Capital

income

MiDAS_LU

Option E=>D : feeding the dynamic model from EUROMOD (for T-B)

Option D=>E : “dynamizing” the EUROMOD framework e.g. for “nowcasting” :


Slide 4

How proceeding ?STEPS TASK REMARKS

1 Preparing input dataset for MiDAS_LU (LIAM2)

Cross-sectional instance, maybe with some lifecycle information (e.g. incomes, for pensions)

2 Running MiDAS_LUOutputs : households and individual socio-economic

characteristics & incomes for several subsequent years

3

Preparing inputs datasets for EUROMOD

from MiDAS_LU output

- A few variables may have to be redesigned when definitions inconsistent in static and dynamic

frameworks, whatever D=E / E=>D- More importantly, some variables may miss (e.g. capital

income), which may be limitative especially if Option D=>E

4Preparing parameter

sheets for future public policies in EUROMOD

- Parameters (e.g. tax rates), but also the policy design (which policies to be simulated, which variables involved)

- - May be a demanding process if Option E=>D

5 Running EUROMOD Outputs : TXT files

6 Combining Results Either within MiDAS_LU (hence EUROMOD outcome back to the dynamic model) or outside (e.g. STATA)


Slide 5

Option D=>E : MiDAS_LU “feeding” EUROMOD for demog & gr. incomeThe dynamic model does not generate all information

(capital income, maintenance payments, etc) available in the static model (based on survey data)

In particular, the dynamic model generates “nuclear” households (parents + children) rather than standard “residence” households

Some gap between input data (situation observed in year t) and first output data (simulation for t+1 on), in the dynamic model

“Weighting” of households (survey data) to be addressed in dyn MSM

Option E=>D : EUROMOD “replacing” the T-B module in Dyn. ModelGiven limitation in the design of policies in dynamic modelling framework,

EUROMOD must be recomposed for this specific use

Both options : Common variables needed & T-B cannot play a role on demographic & socio-economic status (one-way impact)

Conclusions : (reminding) remarks & limitations


Slide 6

A simple evolution is considered: Hourly wage : nominal (Consumer Price Index :+ 2.5%/year)

and real annual growths

Income taxation : change of tax brackets (conformly to the CPI:+ 2.5% / year)

Family allowances : one-shot increase in 2013 : + 2.5% ^ 5

Several social references & thresholds uprated through a central parameter so-called “Minimum Social Wage” : CPI & real growth of the hourly wage

Social assistance indexed on consumer prices

What about outcomes if “dynamics” is introduced ?

(*) Liégeois and Dekkers (2014)

Example (*): Reform of the Tax-Benefit System & Evolution of the gross Income (2008-2018)


Slide 7

Analysis of Results : Population vs T-B effects

3 basic views simulated :

All fields concerned (“POL_POP”) Population and gross Income fixed at their 2008 level ; Tax-Benefit

system evolving, population and gross earnings fixed (“POP_2008”) Tax-Benefit system fixed at its 2008 level ; Population and gross

earnings evolving (“POL_2008”)


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Autumn School Dynamic MSM16-18 November 2015 | L-Esch-sur-Alzette Slide 1 Note Combining LIAM2 and...

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