InGRID winter school in ‘Cross country microsimulation’

Day 2

Xavier Jara, Katrin Gasior, Mattia Makovec,

Miko Tammik

30 November-2 December 2016 Course based on EUROMOD v. G3.0+

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Outline: Day 2

• Morning (9:30-12:30 with a break at 11:00)

– Income lists; EUROMOD Functions and Parameters (cont.)

– Hands-on practice: Exercises 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

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Incomelists

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Incomelists

• Aggregates of several variables

• Standardised output (e.g. ils_dispy)

• func_DefIL : special policy (i.e. ILDef_cc) or any other policy

• Once defined it is available for all subsequent functions and policies

• Naming convention: prefix il_ for “normal”, ils_ for “standard”

• No tax unit defined all income lists built at the individual level

• Behave like a monetary variable

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Function DefIL (1)

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• Components:

─Variables

─Pre-defined income lists

─Fixed amounts

─Constants

•Operations:

─+, -

─fractions can be used

Function DefIL (2)

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• If you want to take out a component in a specific policy system replace operation with n/a

Standardized income lists • Defined in every country

• Built in a comparable way to facilitate cross-national analysis

– ils_earns: earnings

– ils_origy: market incomes

– ils_pen: public pensions

– ils_bennt: non-means-tested benefits

– ils_benmt: means-tested benefits

– ils_ben: all benefits and public pensions

– ils_tax: taxes

– ils_sicee: employee SICs

– ils_sicse: self-employed SICs

– ils_sicer: employer SICs

– ils_sicct: contributed SICs

– ils_dispy: disposable income

– ils_bensim: simulated benefits

– ils_taxsim: simulated taxes

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Incomelists – Matrix view • Summary of income list components

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Policy functions BenCalc, SchedCalc, Allocate

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Function BenCalc (1)

• Benefit calculator, used to implement a wide range of policy instruments, in particular benefits

• It combines the functionalities of the functions func_Elig and func_ArithOp

• Calculates a sum of “components”, where the value of a component is only added if a certain condition is fulfilled by at least one member of the assessment unit

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Function BenCalc (2) • compi_cond = func_Elig |elig_cond

• compi_perTU or compi_perElig = func_ArithOp | formula

– compi_perTU amount is added once

– compi_perElig amount is added once per individual fulfilling the condition is added.

• either perTU OR perElig in one component

• can set upper and lower limits for earch component

– compi_lowlim

– compi_uplim

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Function BenCalc (3)

• Withdraw parameters- subtract something from the calculated sum of components

– withdraw_base: what is being subtracted (ex: variable, income list)

– withdraw_rate: what percentage of the base is being subtracted

– withdraw_start: set a minimum level of the sum of components before any subtraction begins

– withdraw_end: level of the base where sum of the components-base*rate is 0

• Negative result automatically set to 0

• Result=max(Sum of components-max(BASE-START, 0)*RATE, 0)

• Rate and end cannot be used simultaneously

– If withdraw end is specified:

• RATE=(sum of components)/(END-START)

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Function BenCalc (4)

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Function SchedCalc (1) • Used (mainly) for progressive taxes

• Tax schedule

– Tax bands: bandi_upLim / bandi_lowlim

– Tax rate: bandi_rate

– Tax base : base

• Instead rates, for fixed amounts use bandi_amount

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Function SchedCalc (2)

• Joint taxation: quotient

• Result= ((Base/Quotient)*Tax schedule)*Quotient

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Function SchedCalc (3)

• simple_prog: apply highest marginal tax rate reached by base on the whole income

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Function Allocate (1)

• default: result is assigned to the head of the assessment unit.

• Allocate reallocates amounts between members of assessment units (subject to conditions)

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Function Allocate (2)

• Split the amount of a variable

– share: which variable to split

– Amount to split first summed up across assessment unit members

– share_between: condition parameter; who are the members ‘participating’ in the split

– Default is all members of the assessment unit

– share_prop: in what proportion to split between the various qualifying members (i.e. those satisfying the share_between condition)

– Default is sharing in equal proportions

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Parameter values

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Amount parameters • Monetary (numbers; use . for decimal) followed by their period:

– #m for monthly (no conversion)

– #y for yearly

– #q for quarterly

– #w for weekly

– #d for daily

– #l for labour day

– #s for six day labour week

• Default is #m (monthly)

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Query parameters (1) • frequently used ready made calculations

• The results of a query is either yes/no or some (monetary or non monetary) value.

• Well-documented in Help

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Query parameters (2)

• Use IntelliSense to enter values

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query symbol

Formula parameters

• Operations: ^, <min>, <max>, <abs>, (), !(), %, , /, *, \, +, -,

• Operands :

– variables (monetary and non monetary),

– incomelists

– queries

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Condition parameters

• logical and comparison operations to evaluate a condition with a yes/no result.

• Conditions in by curly brackets {}, can be grouped by parenthesis ()

• Negative condition (i.e. !) can be used with a single condition only

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Footnote parameters

• They serve the further specification of other parameters. They are identified by #i (i=number from 1 to....)

– Limits

– Amounts

– Assessment units

– Specification of queries

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Parameter values and the assessment unit

level of interpretation condition parameters other parameters

monetary variables and

incomelists assessment unit assessment unit

non-monetary variables

and individual level

queries

individual head of assessment unit

non individual level

queries check manual check manual

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Exercise 3

• Introducing a benefit cap in Denmark

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System functions Uprate, SetDefault,DefOutput,

DefVar

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Function Uprate (I)

• Indices to uprate monetary variables to price level of policy year

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name of

variable to

be uprated

value of

uprating factor

define factor to be

used later on

Uprating indices (I)

• Datasets -> used with more than 1 system

– May be needed for various exercises (ex: Policy Effects)

– Fewer datasets than systems

• Discrepancy between the year the dataset refers to and the policy year

• Use uprating indices to index the incomes in the dataset to the policy year (i.e. the year you want to simulate)

– Ex: index the income data referring to 2011 to the 2014 level

• Uprating indices- based on raw series

• EM calculates implicit updating factors

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Uprating indices (II)

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the index

name the index-

reference

(handle) ($f_)

policy years

source of

information

Uprating indices (III)

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• You can see the implicit updating factors applied

• Select the dataset you want to view

• Example:

• Dataset BG_2010_b5 income referring to 2009

• CPI increased between 2009 & 2012 by approx. 9%

Function Uprate (I)

• Uprating Indices used by the function Uprate

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Dataset(s) to which the

function applies

Name of income

variable to be

uprated

Reference of

index to be

used for

uprating

Function Uprate (II)

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Aggregate variables Using different values for different groups

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Function SetDefault

• sets alternative values or variables if a dataset variable is missing

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Function DefOutput • Determines the content of the output file

• TAX_UNIT: level of aggregation

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Function DefVar

• To set intermediate (temporary) variables not included in VarConfig.xml

Special functions

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Special functions (advanced)

• func_AddOn_xxx (implement extended functionalities not part of the standard tax-benefit calculations, such Effective Marginal Tax Rates, different budget sets)

• func_Loop and func_UnitLoop (repeat part (or all) of the tax-benefit calculations)

• func_Store and func_Restore (set a variable to the initial (or other previous) value

• func_ChangeParam (modify parameters during the model run)

• func_Totals (calculates aggregates over groups of persons/households)

• func_DropUnit and func_KeepUnit (drops certain persons/households from the calculations)

• func_ILVarOp (performs operations on variables that are part of an income list)

• func_RandSeed (generates random numbers)

• func_CallProgramme (calls another programme, e.g., Stata)

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End of session

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