Slide 1
Note
Combining LIAM2 and EUROMOD:
a (useful?) possibility
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette
Slide 2
Motivating the combination (*)
 Given complexity of microsimulation models, hence development
costs, it is often useful to raise the question of a combination of
tools rather than parallel compositions
 This is particularly true as soon as the static model EUROMOD
(Sutherland et al.) and dynamic models built from LIAM2
(O’Donoghue et al., Dekkers et al.) are considered
 Their internal structure, including variables needed for simulation,
and their technical implementation show similarities that make an
interaction a priori promising
 We explain how it is feasible, emphasize limits of the exercise
+ example of application if time left
(*) Liégeois Ph. and G. Dekkers, (2014), Combining EUROMOD and LIAM Tools for the
Development of Dynamic Cross-sectional Microsimulation Models : a Sneak Preview, in G.
Dekkers, M. Keegan and C. O’Donoghue (eds), New Pathway in Microsimulation, Burlington :
Ashgate
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette
 Option E=>D : feeding the dynamic
What’s at stake ?

Reforms of
Tax-benefit
systems
Demographic
changes
Modifications of
Employment
status
Autumn School Dynamic MSM
model from EUROMOD (for T-B)
Option D=>E : “dynamizing” the
EUROMOD framework e.g. for
“nowcasting” :
Gross
Income
variations
Macro
adjustments
16-18 November 2015 | L-Esch-sur-Alzette
Slide 3
Slide 4
How proceeding ?
STEPS
TASK
REMARKS
1
Preparing input dataset
for MiDAS_LU (LIAM2)
Cross-sectional instance, maybe with some lifecycle
information (e.g. incomes, for pensions)
2
Running MiDAS_LU
Outputs : households and individual socio-economic
characteristics & incomes
for several subsequent years
3
Preparing inputs
datasets for
EUROMOD
from MiDAS_LU output
- A few variables may have to be redesigned
when definitions inconsistent in static and dynamic
frameworks, whatever D=E / E=>D
- More importantly, some variables may miss (e.g. capital
income), which may be limitative especially if Option D=>E
4
Preparing parameter
sheets for future public
policies in EUROMOD
- Parameters (e.g. tax rates), but also the policy design
(which policies to be simulated, which variables involved)
- - May be a demanding process if Option E=>D
5
Running EUROMOD
Outputs : TXT files
6
Combining Results
Either within MiDAS_LU (hence EUROMOD outcome back to
the dynamic model) or outside (e.g. STATA)
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette
Slide 5
Conclusions : (reminding) remarks & limitations
 Option D=>E : MiDAS_LU “feeding” EUROMOD for demog & gr. income
 The dynamic model does not generate all information
(capital income, maintenance payments, etc) available in the static model
(based on survey data)
 In particular, the dynamic model generates “nuclear” households (parents +
children) rather than standard “residence” households
 Some gap between input data (situation observed in year t) and first output
data (simulation for t+1 on), in the dynamic model
 “Weighting” of households (survey data) to be addressed in dyn MSM
 Option E=>D : EUROMOD “replacing” the T-B module in Dyn. Model
 Given limitation in the design of policies in dynamic modelling framework,
EUROMOD must be recomposed for this specific use
 Both options : Common variables needed & T-B cannot play a role on
demographic & socio-economic status (one-way impact)
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette
Slide 6
Example (*): Reform of the Tax-Benefit System &
Evolution of the gross Income (2008-2018)
 A simple evolution is considered:
 Hourly wage : nominal (Consumer Price Index :+ 2.5%/year)
and real annual growths
 Income taxation : change of tax brackets
(conformly to the CPI:+ 2.5% / year)
 Family allowances : one-shot increase in 2013 : + 2.5% ^ 5
 Several social references & thresholds uprated through a
central parameter so-called “Minimum Social Wage” :
CPI & real growth of the hourly wage
 Social assistance indexed on consumer prices
What about outcomes if “dynamics” is introduced ?
(*) Liégeois and Dekkers (2014)
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette
Slide 7
Analysis of Results : Population vs T-B effects

3 basic views simulated :
 All fields concerned (“POL_POP”)
 Population and gross Income fixed at their 2008 level ; Tax-Benefit
system evolving, population and gross earnings fixed (“POP_2008”)
 Tax-Benefit system fixed at its 2008 level ; Population and gross
earnings evolving (“POL_2008”)
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette
Slide 8
Analysis of Results : Population vs T-B effects

3 basic views simulated :
 All fields concerned (“POL_POP”)
 Population and gross Income fixed at their 2008 level ; Tax-Benefit
system evolving, population and gross earnings fixed (“POP_2008”)
 Tax-Benefit system fixed at its 2008 level ; Population and gross
earnings evolving (“POL_2008”)
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette
Slide 9
Analysis of Results : Population vs T-B effects

3 basic views simulated :
 All fields concerned (“POL_POP”)
 Population and gross Income fixed at their 2008 level ; Tax-Benefit
system evolving, population and gross earnings fixed (“POP_2008”)
 Tax-Benefit system fixed at its 2008 level ; Population and gross
earnings evolving (“POL_2008”)
Autumn School Dynamic MSM
16-18 November 2015 | L-Esch-sur-Alzette