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The Impact of Tax-Benefit Systems on Low Income Households in the Benelux Countries. A Simulation Approach Using Synthetic Datasets

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Author Info
Berger F
Borsenberger M
Immervoll H
Lumen J
Scholtus B
De Vos K

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Abstract

Computing the tax-benefit position of similar "typical" households across countries is a method widely used in comparative fiscal- and social policy research. These calculations provide convenient summary pictures of certain aspects of tax-benefit systems. They can, however, be seriously misleading because they reduce very complex systems to single point estimates. Using an integrated European tax-benefit model (EUROMOD), we substitute the typical household by a synthetic dataset, which can be used across countries. By varying certain important household characteristics (notably income), this dataset captures a much larger range of household situations. The calculations performed on this range of households not only show the tax-benefit position of many individual households but also demonstrate which household characteristics determine taxes and benefits in each country. Hypothetical calculations such as those presented here do not exploit the ability of EUROMOD to determine the impact of social and fiscal policies on actual populations. Nevertheless, they can be a valuable contribution to understanding tax-benefit systems since they allow us to separate the effects of tax-benefit rules from those of the population structure. We compute and compare disposable incomes for a large range of pre-tax-and-benefit income (so called budget constraints) of households in the Benelux countries. Disposable incomes are then decomposed to separately show the effects of each simulated tax and transfer payment. Based on these results, we illustrate the performance of the three tax-benefit systems in terms of ensuring a minimum level of household income.

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Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number em3/01.

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Date of creation: Jul 2001
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Handle: RePEc:ese:emodwp:em3/01

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Related research
Keywords: Microsimulation European Union Benelux Average Production Worker Poverty

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Michael F. Förster, 2000. "Trends and Driving Factors in Income Distribution and Poverty in the OECD Area," OECD Labour Market and Social Policy Occasional Papers 42, OECD Directorate for Employment, Labour and Social Affairs. [Downloadable!]
  2. Immervoll H & O'Donoghue C & Sutherland H, 1999. "An Introduction to EUROMOD," EUROMOD Working Papers em0/99, EUROMOD at the Institute for Social and Economic Research. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Giuseppe Carone & Aino Salomaki & Herwig Immervoll & Dominique Paturot, 2004. "Indicators of unemployment and low-wage traps (Marginal effective tax rates on labour)," Labor and Demography 0409007, EconWPA. [Downloadable!]
  2. Lietz C & Mantovani D, 2006. "Lessons From Building And Using Euromod," EUROMOD Working Papers em5/06, EUROMOD at the Institute for Social and Economic Research. [Downloadable!]
  3. Immervoll H, 2004. "Average and marginal effective tax Rates facing workers in the eu. A Micro-level analysis of levels, Distributions and driving factors (revised version of EM2/02)," EUROMOD Working Papers em6/04, EUROMOD at the Institute for Social and Economic Research. [Downloadable!]
  4. Immervoll H, 2002. "The Distribution of Average and Marginal Effective Tax Rates in European Union Member States," EUROMOD Working Papers em2/02, EUROMOD at the Institute for Social and Economic Research. [Downloadable!]
  5. Herwig Immervoll, 2003. "The Distribution Of Average And Marginal Effective Tax Rates In European Union Member States," Public Economics 0302005, EconWPA. [Downloadable!]
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