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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
– Hands-on practice: Exercise 2
2
Outline: Day 2
• Morning (9:30-12:30 with a break at 11:00)
– Income lists
– EUROMOD Functions and Parameters (cont.)
– Hands-on practice: Exercise 3
– EUROMOD Functions and Parameters (cont.)
• Afternoon (14:00-17:00 with a break at 15:30)
– Hands-on practice: Exercises 4 & 5
– Hands-on practice: Exercise 6
3
Outline: Day 3
• Morning (9:30-12:30 with a break at 11:00)
– Assessment (tax) units in EUROMOD
– Hands-on practice: Exercise 7
• Afternoon (14:00-17:00 with a break at 15:30)
– 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