InGRID winter school in Cross country · InGRID winter school in Cross country microsimulation [...

InGRID winter school in ‘Cross country microsimulation’

Day 1

Xavier Jara, Katrin Gasior, Mattia Makovec,

Miko Tammik

ISER, U Essex 30 November-2 December 2016

Course based on EUROMOD v. G3.0+

1

Outline: Day 1

• Morning (10:00-12:30 with a break at 11:00)

– Tax Benefit Microsimulation and EUROMOD

– Model Design

– The EUROMOD User Interface(UI)

– Running EUROMOD

– Summary Statistics Tool

– Error handling Documentation

• Afternoon (14:00-17:00 with a break at 15:30)

– Hands-on practice: Exercise 1

– EUROMOD functions and parameters


2

Outline: Day 2


– Income lists

– EUROMOD Functions and Parameters (cont.)


– EUROMOD Functions and Parameters (cont.)


– Hands-on practice: Exercises 4 & 5


3

Outline: Day 3


– Assessment (tax) units in EUROMOD



– Hands-on practice: Exercises 8 & 9

– Presentations by participants

– Using EUROMOD after the course

– Q&A

4

Tax-benefit microsimulation and EUROMOD

5

Microsimulation

• Micro: technique using units (ex: individuals, households, firms etc.)

instead of aggregate information

– Tax-benefit models: household microdata

• Simulation: application of an intervention that may change the state or

behaviour of units

– Tax benefit models: tax and benefit rules determine entitlements &

liabilities

• Contribution: estimates results derived from the application of these rules

on each unit.

– Tax benefit models: impact on disposable income

6

Why tax-benefit microsimulation? 0

.25

.5.7

5

marg

inal ta

x r

ate

1 2 3 4 5 6 7 8 9 10deciles

Source: Euromod using EU-SILC 2004

• Population diversity and frequency

• Policy complexity: detail and interactions

What makes EUROMOD special?

• Multi-country tax-benefit model for the European Union: unique

• Harmonised data and simulations

• Very flexible structure (but scope depends on data available)

• Tax-benefit modelling language: universal

• Library of policies

8

What can EUROMOD do?

• Simulate previous, current, future and “potential” tax-benefit rules

– Distributive analysis

– Budgetary effects

– Indicators of work incentives

• Complex policy reforms (e.g. revenue-neutral)

• Policy swapping

• Counterfactual (“what if”) scenarios (e.g. stress test)

• EU-wide policy reforms

• Tax evasion and non-take-up simulation/calibration (special data )

• Input in other analyses (ex: labour supply models; links with CGE etc.)

9

Examples-Counterfactual scenarios (I)

• To what extent tax-benefit systems support those who became unemployed at the onset of the Great Recession?

10

Source: Fernandez et al. (2013) Review of Income and Wealth

Examples-Counterfactual scenarios (II)

• Poverty effects of child related policy instruments in Poland

11

0%

5%

10%

15%

20%

25%

30%

35%

FGT0 FGT1 FGT2

Baseline 2005

PL-2007

Austrian system

French system

UK system

No fam ben

Source: Levy, Morawski and Myck, Euromod Working Paper 3/08

Examples-Work incentives

• Calculate Marginal Effective Tax Rates

12

Source: Jara and Tumino (2013) International Journal of Microsimulation

Examples-EU-wide reforms

• Net replacement rates with and without a EU-wide UI benefit

13

2030405060708090

100110

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

Nat

ion

al

EMU

-UI

flat

EMU

-UI

%

DE EE EL ES FR IT LV AT PT FI

p25-p75 Median Mean

Source: Jara & Sutherland (2014) Social Situation Monitor Research Note 3/13

Examples-Behavioural reactions • Calculating labour supply elasticities

14

0

.2

.4

.6

.8

Ow

n-w

age

elas

ticity

EE05

UK0

1

PL05

SW01

FR01

FI98

PT01

US0

5

HU

05

DK9

8

BE01

GE0

1

IE01

NL0

1

IT98

AT98

SP01

GR

98

Married women

0

.2

.4

.6

.8

Ow

n-w

age

elas

ticity

UK0

1

PT01

PL05

IT98

NL0

1

FR01

SW01

AT98

SP01

US0

5

HU

05

EE05

FI98

GR

98

BE01

GE0

1

DK9

8

IE01

Married men

0

.2

.4

.6

.8

Ow

n-w

age

elas

ticity

PT01

NL0

1

PL05

AT98

FR01

HU

05

EE05

GR

98

SW01

US0

5

GE0

1

UK0

1

IT98

DK9

8

BE01

FI98

SP01

IE01

Single men

0

.2

.4

.6

.8

Ow

n-w

age

elas

ticity

PT01

HU

05

PL05

EE05

FR01

DK9

8

AT98

NL0

1

GE0

1

SP01

FI98

SW01

US0

5

UK0

1

IE01

GR

98

BE01

IT98

Single women

Point estimate 95% confidence interval

Source: Bargain et al. (2013) Journal of Human Resources

EUROMOD in this course • EUROMOD is continuously being developed and improved

• Software version: 1.12.9

• Latest public release (G3.0+)

• Countries and policies

– All 28 EU MS implemented

– #of policy years (‘Systems’) implemented varies by country

• 2005-2015 : BE, CZ, EE, EL, ES, IT, PL, UK (longest series)

• 2011-2015: HR (shortest series)

• All consecutive years after the starting year-implemented

• Data

– EU-SILC/ FRS (UK)

– training data

– # of datasets available –depends on country

15

Overview of EUROMOD design

16

Structure

17

Input microdata

(text file in

tabular format)

Policy parameters

(XML files-

EUROMOD UI)

Simulations/

Calculations

(EURMOD

Engine in C++)

Output microdata with

additional simulated

variables (text file in

tabular format)

• Generated (using a software package; ex: Stata) from the source micro-data (SILC)

• Text file (in tabular format)

• 5 types of variables (plus identifiers):

– demographic, labour, income, assets, expenditure

• Some variables-compulsory (e.g., id, age, weight, incomes)

• Harmonised data reference period

• No missing values allowed

• All income and expenditure –gross values

• Incomes & expenditure-at the individual level

• Monetary variables reported on (average) monthly basis

• Documentation (do-files template , DRD, & EMC)

EUROMOD input dataset 18

Names are combination of acronyms: abb** a – type of information (e.g., y: income, x: expenditure)

bb – specific for each type a (e.g., y| em: employment, se: self employment)

eg. yem: employment income

yse: self-employment income

** further bb’s for additional information/detail

eg. ysebs: business self-employment income

exception id*, eg. idperson, idmother

Variable name convention 19

Structure

20

Input microdata

(text file in

tabular format)

Policy parameters

(XML files-

EUROMOD UI)

Simulations/

Calculations

(EURMOD

Engine in C++)

Output microdata with

additional simulated

variables (text file in

tabular format)

EUROMOD policy parameters • Contain all info about tax-benefit rules

• Stored in XML files read by the EUROMOD engine

• Common Variables file (VarConfig.xml)

• Manipulated via user interface (UI)

• UI-stand alone software based on .NET framework

• Scope: – Social insurance contributions – Income tax – Non-contributory benefits (means-tested or not) – Contributory unemployment benefits (approximation) – Min wage – Additional policies-country specific!

21

EUROMOD User Interface

22

Installation

• Requires Microsoft .NET framework files or an Internet connection to download files in the SETUP process

• Complete separation between UI and ‘content’ (i.e. XML) files

• Only one copy of the UI but can use multiple ‘content’ files

• ...but content files must have set structure of folders

• Run the Installation Wizard

• Set the path to your EUROMOD files

– Project path

– (if necessary) separate input data and output data paths

23

EUROMOD folder structure

24

Linking EUROMOD to content files

25

User Interface (UI) • Single stand-alone piece of software

• Mostly point and click but some hot keys are available (standard and specific)

• In-built features that allow for improved user control and guidance

• Intuitive!!

• Features:

– Ribbon bar with tabs

– Context menus

– IntelliSense (suggestion of parameter values )

– Drag and drop

– Bookmarks and comments

– Built-in help

– Display customization

– …much more

• New features and capabilities added over time

26

User Interface (UI)

27

Run button

Ribbon bar

Country files

Working environment 28

policy systems

comments

policies

open

country

Ribbon bar

29

Country tools: - open country to activate buttons -contains options that manipulate the general parameters of a country file -name and acronym -currencies used for parameters in the system and output -which datasets are available and their characteristics -Adding and deleting systems -Viewing options: -search and replace -formatting -bookmarks -Comparing versions -More advanced (import/ export systems, add-ons etc.)

Systems Settings

30

set

exchange

rate

Parameters’

currency

output currency

income used

for head

definition

Database settings

31

adding/

deleting folder where micro-data stored

if different from default

characteristics of

dataset

Policy years for

which available

Ribbon bar

32

Control display and formatting

• View full spine vs. single policy • Conditional formatting (similar idea to EXCEL) • Bookmarks • Matrix view of income lists • Visualising/ hiding key parameters

Ribbon bar

33

Administration tools: • adding and deleting countries • accessing and administering the variables file • updating progress: overview of available policy systems and datasets • merging versions • administrating switches

EUROMOD Help

34

browse search

Variable Administration

35

Variables file

36

list of all

variables

defined in the

variables file

in alphabetical

order

name

description of

variable for

countries where it is

used

automatic

label

variable is monetary or non-

monetary

Adding a variable

37

new empty row;

fill in name and monetary

Naming a variable

38

acronyms

UI checks validity of name and

existence of the variable

Filtering variables

39

select filters

Context menus

40

Context Menus

• Activated by right-clicking

– Column headings

– Row headings

– Function headings/ parameter names

– Comments

• Intuitive options controlling the respective elements

41

IntelliSense

42

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