The Use of Hypothetical Household Data for Policy Learning: Comparative Tax‒Benefit Indicators Using EUROMOD HHoT

Katrin Gasior,Pasquale Recchia

doi:10.1080/13876988.2019.1609784

Abstract

Tax‒benefit microsimulation models are typically used to quantify the effect of specific policy changes on the income distribution based on representative microdata. Such analysis evaluates policies by considering how different tax‒benefit elements interact given personal, household and labour market characteristics. Using hypothetical household data instead helps address broader questions of policy design and systemic (cross-national) differences. This article introduces the Hypothetical Household Tool (HHoT) in combination with the microsimulation model EUROMOD to analyse European tax‒benefit policies from a comparative perspective. It presents a series of applications from social welfare analysis illustrating how hypothetical data can benefit comparative academic and policy research.

Highlights

Tax‒benefit microsimulation models are typically used to assess the impact of policy changes on the income distribution based on representative microdata
Household Tool (HHoT), which is embedded in the EUROMOD interface as an extra application, allows users to generate an alternative dataset with hypothetical households that can be used to calculate the same tax and benefit elements but based on model families
We propose a collection of indicators produced with EUROMOD-HHoT in order to provide an up-to-date assessment of European tax‒benefit systems with a focus on the mechanics – i.e. the pure policy effects

Summary

Introduction

Tax‒benefit microsimulation models are typically used to assess the impact of policy changes on the income distribution based on representative microdata. We provide a comprehensive overview of European welfare systems focusing on the role of cash benefits, taxes and Social insurance contributions (SIC) for the unemployed, inactive and families with children. EUROMOD is the tax‒benefit microsimulation model for the EU that enables researchers and policy analysts to calculate, in a comparable manner, the effects of taxes and benefits on household incomes for the population of each country and for the EU as a whole (Sutherland and Figari 2013).

Results

Conclusion