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The Impact Of Tax-Benefit Systems On Lowincome Households In The Benelux Countries. A Simulation Approach Using Synthetic Datasets

Listed author(s):
  • Frédéric Berger


  • Monique Borsenberger


  • Herwig Immervoll

    (University of Cambridge)

  • Julie Lumen

    (DULBEA, Université Libre de Bruxelles)

  • Bertrand Scholtus

    (DULBEA, Université Libre de Bruxelles)

  • Klaas DeVos

    (CentER Applied Research, Tilburg University)

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 EconWPA in its series Microeconomics with number 0302003.

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Date of creation: 07 Feb 2003
Date of revision: 07 Feb 2003
Handle: RePEc:wpa:wuwpmi:0302003
Note: Type of Document - ; figures: included
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References listed on IDEAS
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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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