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

  • Berger, Frederic
  • Borsenberger, Monique
  • Immervoll, Herwig
  • Lumen, Julie
  • Scholtus, Bertrand
  • de Vos, Klaas

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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File URL: https://www.iser.essex.ac.uk/research/publications/working-papers/euromod/em3-01.pdf
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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: 02 Jul 2001
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Publication status: published
Handle: RePEc:ese:emodwp:em3-01
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  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 Publishing.
  2. Sutherland, Holly & Immervoll, Herwig & O'Donoghue, Cathal, 1999. "An introduction to EUROMOD," EUROMOD Working Papers EM0/99, EUROMOD at the Institute for Social and Economic Research.
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