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.
Tax-benefit microsimulation models are typically used to assess the impact of policy changes on the income distribution based on micro data representative of the population. Such analysis assesses the effects of tax-benefit policies by considering their interaction effects and the population structure, which are both important elements for an overall assessment of complex realities. However, it can be helpful to abstract from this complexity and to explain the effects of tax-benefit policies using concrete examples. Using hypothetical households visualises how single policies are linked with each other while leaving the additional complexity of the population structure aside. This paper uses the Hypothetical Household Tool (HHoT) to generate hypothetical household data that can be used in EUROMOD, the tax and benefit microsimulation model of the European Union, to analyse current tax and benefit policies as well as the effects of policy changes in a comparative manner. The paper provides a brief introduction of the use of hypothetical data in general and presents concrete examples of its application. The main part proposes a set of basic indicators that can be used to learn about European tax-benefit systems in a comparative perspective.
The at-risk-of-poverty rate (AROP) is one of the three indicators used for monitoring progress towards the Europe 2020 poverty and social exclusion reduction target. Timeliness of this indicator is crucial for monitoring of the social situation and of the effectiveness of tax and benefit policies. However, partly due to the complexity of EU-SILC data collection, estimates of the number of people at risk of poverty are published with a significant delay. This paper extends and updates previous work on estimating ('nowcasting') indicators of poverty risk using the tax-benefit microsimulation model EUROMOD. The model's routines are enhanced with additional adjustments to the EU-SILC based input data in order to capture changes in the employment characteristics of the population since the data were collected. The nowcasting method is applied to twenty-seven EU Member States. Median income and AROP rates are estimated up to 2016. The performance of the method is assessed by comparing the predictions with actual EU-SILC indicators for the years for which the latter are available. If nowcasts are unreliable we explain the main reasons behind the differences between the nowcasted and SILC-based indicators. For countries with stable and reliable results we discuss the main drivers behind the nowcasted trends.
Die Verfasser geben zunächst einen Überblick über die gewählten Indikatoren zur Messung von Armut sowie über die Begriffe "Armutsgefährdung" und "materielle Deprivation". Die folgende empirische Untersuchung beleuchtet die Situation älterer Menschen in der Europäischen Union. Die soziale Lage älterer Menschen wird verglichen mit der Lage von Menschen im Erwerbsalter und der Gesamtbevölkerung. Dabei werden soziodemografische Merkmale wie das Geschlecht und Unterschiede zwischen älteren und jüngeren Alterskohorten innerhalb der älteren Bevölkerung berücksichtigt. Ein weiterer empirischer Abschnitt zeigt Entwicklungstendenzen der Armutsgefährdung im Alter zwischen 2004 und 2008 auf und vergleicht diese mit der Generation der Kinder und Jugendlichen. In einem letzten Teil wird ein alternativer Indikator zur Messung von Armut innerhalb der Europäischen Union genutzt - die materielle Deprivation. (ICE2)
Die Verfasser geben zunächst einen Überblick über die gewählten Indikatoren zur Messung von Armut sowie über die Begriffe "Armutsgefährdung" und "materielle Deprivation". Die folgende empirische Untersuchung beleuchtet die Situation älterer Menschen in der Europäischen Union. Die soziale Lage älterer Menschen wird verglichen mit der Lage von Menschen im Erwerbsalter und der Gesamtbevölkerung. Dabei werden soziodemografische Merkmale wie das Geschlecht und Unterschiede zwischen älteren und jüngeren Alterskohorten innerhalb der älteren Bevölkerung berücksichtigt. Ein weiterer empirischer Abschnitt zeigt Entwicklungstendenzen der Armutsgefährdung im Alter zwischen 2004 und 2008 auf und vergleicht diese mit der Generation der Kinder und Jugendlichen. In einem letzten Teil wird ein alternativer Indikator zur Messung von Armut innerhalb der Europäischen Union genutzt - die materielle Deprivation. (ICE2).
"Die Lebenserwartung der EuropäerInnen steigt stetig an. Eine zu beobachtende Konsequenz daraus ist ein höherer Anteil älterer Menschen in europäischen Gesellschaften. Da die Erwerbsjahre nicht proportional zur Lebenserwartung ansteigen, verbringen ältere Menschen heute einen größeren Abschnitt ihres Lebens in der sogenannten Dritten Lebensphase, dem Ruhestand. Aus einer gesundheitlich und finanziell guten Lage heraus, schaffen es viele ältere Menschen diese gewonnene Lebenszeit für neue soziale und auch wirtschaftliche Erfahrungen zu nutzen. Gleichzeitig muss jedoch hervorgehoben werden, dass ältere Menschen keinesfalls eine homogene Gesellschaftsgruppe sind, sondern sich durch ihre gesundheitliche, soziale und auch finanzielle Verfassung voneinander unterscheiden. Eine weitreichende individuelle Erfahrung des Alterns ist der Eintritt einer Behinderung, die vielfach mit deutlichen gesundheitlichen Einschränkungen verbunden ist und 'Active Ageing' zu einem bloßen Schlagwort macht." (Autorenrefrat)
This paper examines the application of the German Hartz-IV model in Austria. If the Hartz-IV reform were to be transferred to Austria, this would imply that instead of unemployment assistance (Notstandshilfe), the social-assistance-type minimum income benefit (Bedarfsorientierte Mindestsicherung) would be follow-up assistance after unemployment benefit expires. The analysis is carried out using the tax-benefit microsimulation models EUROMOD and SORESI based on the latest EU-SILC 2015 data for Austria. We simulate a baseline scenario according to the minimum income benefit regulations of the nine Federal States for the year 2017 and a scenario including a proxy for an asset check of capital income. In addition, following current political discussions and developments, we simulate a ceiling scenario, in which the sum of minimum standards per household is capped at EUR 1,500 per month. The direct (monetary) effects of the potential reform are analysed on three levels: fiscal implications; number of receiving households including socio-demographic characteristics; income distribution and risk of poverty.
Tax and benefit systems play an important role in determining work incentives at both, the extensive and the intensive margin of labour supply. The aim of this paper is to provide a comprehensive comparative analysis of work incentives in the EU. Our analysis makes use of microsimulation techniques and representative household surveys from all 28 EU countries to compare the distribution of short- and long-term participation tax rates and marginal effective tax rates across population subgroups. We focus on people currently in work and characterise the population facing low work incentives in each country. Our results highlight the large variation in the distribution of work incentives across EU countries, explained not only by differences in the design of tax-benefit systems, but also by the characteristics of the labour force across countries. Unemployment insurance benefits contribute substantially to short-term participation tax rates and explain on average 20 percentage point difference between work incentives of short- vs. long-term unemployment. Our analysis further highlights the need to use microdata to study differences across countries in terms of the population subgroups facing low incentives to work with the aim to inform the policy debate on potential reforms to make work pay.
AbstractIndonesia is among the countries with the highest exposure to natural disasters, and risks are expected to increase due to climate change. Natural disasters and other shocks require well‐developed social protection systems that can cushion the economic consequences for those most vulnerable to these events. International stakeholders advocate for 'Adaptive Social Protection' which links social policy with strategies on disaster risk reduction and climate change adaptation. This article uses the tax‐benefit microsimulation model INDOMOD to analyse the adaptiveness of the Indonesian social protection system by simulating an income shock caused by a natural disaster and testing reforms to the existing social protection system. We find that the existing system generally performs well in lifting people out of poverty in normal times but does not sufficiently help them to prepare for and cope with shocks. This is especially the case for large households, households with more than two children, people in their 20s and 80s and individuals with a disability. The tested hypothetical reforms reduce the impact of the shock and better target those identified as needing more support but require a substantial increase in social spending.
PurposeThe paper aims to assess the effects of taxes and benefits on inequality and poverty in five African countries: Ghana, Mozambique, South Africa, Uganda and Zambia.Design/methodology/approachThe authors use newly developed micro-simulation models to analyse the distribution and composition of incomes.FindingsThe study's results suggest that income-based measures result in higher levels of poverty and inequality than consumption-based measures. The country with the most effective system in terms of reducing income inequality and poverty is South Africa; in Ghana, the tax-benefit system was found to have the smallest impact on inequality. The systems of Uganda, Mozambique and Zambia were estimated to have no poverty-reducing properties; many individuals remain largely unaffected by them as they are too poor to pay direct taxes, and benefits are very modest and narrowly targeted.Originality/valueWhile consumption data are crucial for measuring poverty, income data are becoming vital for assessing the extent to which tax-benefit policies achieve redistribution in economies where own-consumption is becoming less significant and the share of people in employment is increasing. To the best of the authors' knowledge, this is the first study where poverty and inequality are measured in both terms, for several African countries in a common framework.
A large share of the population in Zambia is living below the national poverty line. To reduce poverty, in 2019, the government initiated the Cash Plus reform, which aims to build on the existing Social Cash Transfer as a floor benefit with additional benefits to take account of the multidimensionality of poverty. We use the tax-benefit microsimulation model MicroZAMOD to analyse the coverage and poverty impact of the current social protection system and to assess the extent to which potential Cash Plus reform scenarios can improve the status quo. The results highlight the need for reform to achieve greater poverty reduction. Overall, coverage of the extremely poor is high but coverage by the Social Cash Transfer as the envisaged floor benefit in the Cash Plus reform is low, and the benefit amount is often too little as it does not take account of household composition. In theory, the Cash Plus reform offers the potential to achieve a greater poverty impact through multiple support. However, the simulations of the potential reform scenarios show that this requires more than the proposed Cash Plus design.
AbstractNon‐take‐up of means tested benefits is a widespread phenomenon in European welfare states. The paper assesses whether the reform that replaced the monetary social assistance benefit by the minimum income benefit in Austria in 2010/11 has succeeded in increasing take up rates. We use EU‐SILC register data together with the tax‐benefit microsimulation model EUROMOD/SORESI. The results show that the reform led to a significant decrease of non‐take‐up from 53 to 30% in terms of the number of households and from 51 to 30% in terms of expenditure. Following the three‐t's (threshold, trigger, and trade‐off) introduced by Van Oorschot, estimates of a two‐stage Heckman selection model as well as expert interviews indicate that the taken measures include both threshold and trade‐off characteristics. Elements such as the higher degree of anonymity within the claiming process, the provision of health insurance, binding minimum standards, the limitation of the maintenance obligations, new regulations related to the liquidation of wealth, as well as the general coverage of the benefit reform in the media and in public discussions led to an improved access to the benefit.
The active and healthy ageing measure reported here is calculated for the 28 European Union countries, with a specific focus on the current generation of older people and by using the latest data from multiple surveys. It covers diverse aspects of active and healthy ageing, by measuring older people's contribution with respect to not just employment but also their unpaid familial, social and cultural contributions and their independent, healthy and secure living. The article presents the first-of-its-kind quantitative measure of active and healthy ageing in the literature on active and healthy ageing which hitherto has focused largely on concepts, definitions and public policy strategies. In this pursuit, an important contribution of this measure, referred to as the Active Ageing Index ('AAI'), is that it also captures how countries differ with respect to capacity and enabling environments for active and healthy ageing. The AAI offers a breakdown not just by four domains of active and healthy ageing but also by gender. Key findings are that Sweden comes at the top of the country ranking, followed closely by Denmark, the United Kingdom, Finland, the Netherlands and Ireland. The four southern European countries (Italy, Portugal, Spain and Malta) are middle-ranked countries. Greece and many of the Central European countries are at the bottom, highlighting much greater untapped potentials of active and healthy ageing among older people in these countries and a need for greater policy efforts. Women fare worse than men in most countries, identifying a need for an emphasis on reducing gender disparity in experiences of active and healthy ageing. The AAI tool developed has the potential to identify the social policy mechanisms behind the differential achievements of active and healthy ageing, for example, what active and healthy ageing strategies have driven top performers, and in what respect the bottom-ranked countries have lagged behind.
