Reviewed by
Attila Szabo
AITIA International, Inc
This book is based on a selection of papers from the final conference of
the "Improving the Capacity and Usability of EUROMOD (I-CUE)" project.
As the book is a collection of simulation results obtained using
tax-benefit microsimulation models the contents are rather specific. What
makes the achievements of the I-CUE project (and its predecessors)
interesting to the broader community is that the presented results were
born under the aegis of a uniquely enormous effort to create and maintain
an EU-wide model to support policy making. Therefore the project's
experiences and success can be instructive for any future proposals those
aim to develop and maintain a complex simulation system that set a similar
goal.The book emphasizes the achievements and also points out the important limitations of the implemented approach. It places the I-CUE project to a context by giving a historical background of EUROMOD and by outlining the plans for the future of the model. These future plans include quite ambitious ones, like adding new extensions to the existing model (indirect taxes, modeling non-take-up of benefits, tax evasion, etc.), and rather technical tasks, like continual updates of data on household incomes, tax policies of countries and so on. On the whole, this volume is a demonstrative snapshot of a large-scale living project of microsimulation.
Chapter 1 gives an introduction to the book and reviews the following chapters briefly.
Part I sets the scene for the simulation results. Chapter 2 underlines the importance of expanding the existing EUROMOD version to cover the entire European Union. It briefly overviews the past of tax-benefit models in the UK from 1968 to present days - which in itself is an interesting story. It also argues that such models are capable of supporting policy making in order to reach EU objectives, such as reducing the risk of poverty. Chapter 3 outlines the past, present and the future of EUROMOD. This section addresses the technical issues of the model development (such as difficulties connected with data access, permissions and other barriers), and discusses the relevance of the results. It also overviews the short, medium, and long term extensions and developments planned to improve the model.
Part II demonstrates the comparative power of EUROMOD, with a special focus of the new member states. Part II has 3 chapters that utilize different benefits of the multi-country property of the model. Chapter 4 overviews the income composition, income inequality and redistribution, and poverty rates of 19 European Union countries (those are the 'EU 15' countries, Estonia, Hungary, Poland and Slovenia). This study helps to place the new member states' tax-benefit systems in the context of the EU. Chapter 5 analyzes 3 alternative flat tax reform scenarios in Estonia, Hungary and Slovenia. Results show the costs and direct effects of the desired tax system simplification (because of flat tax schemes, lower level of tax evasion is expected, but flat tax systems leads to raising inequality and poverty in the simulated scenarios). Chapter 6 studies alternative strategies to reduce child poverty in Poland. This work compares the actual system to three other existing systems applied in EU countries (Austria, France and the United Kingdom).
In Part III, national models are used to evaluate public policy effectiveness in a single country. Chapter 7 analyzes the immediate and long-run poverty and inequality effects of a child support reform that was introduced in Lithuania. Simulations were used to model the impact of each stage of the reform's implementation not only on the distributional income changes of families, but also on other social assistance benefits. Chapter 8 compares the effects on labour market participation of tax-free income and in-work tax allowances in Cyprus. Here, the focus is on the heterogeneity of individuals who are influenced by both disposable income and by their personal and family characteristics.
The concluding chapter overviews the options to increase the contribution of microsimulation models in policy making procedures. This section can also be taken as a brief summary of the experiences of the I-CUE project.
The book publishes relevant simulation results (chapters 4-8) as the studies use national survey datasets and the dataset of the European Union Statistics on Income and Living Conditions (EU-SILC). What's missing is that there's no artificial society modelled in these studies: as Holly Sutherland points out, "EUROMOD is a tool that carries out static, arithmetic calculations of a first round effect of a policy reform" (p. 51). Therefore the obtained model results show only the changes of disposable income of households and miss to predict how households will adapt to the altered situation.
Beyond the content, this is a well structured book. Part I provides a detailed background that helps to understand the rest of the book better and easier. It describes the past and future of the models used later in the book. Then a series of in-depth studies is presented about different policy effects on household income changes. Finally with the concluding chapter, the book gives a good overview of the development of EUROMOD which could be profitable for all scientists interested in development of simulation models.
The appropriate collection of published studies in Part II and III make the book interesting for a broader audience by providing an overall view on the possible applications of the model (comparison of states based on the data, comparison of changes in different countries when applying the same reforms, etc.). At the same time, the in-depth analysis in individual chapters is interesting for economists and social scientists working in the field of tax and benefit policies.
On the whole, this book is interesting for the broader community and should be read by the experts of tax-benefit policies.
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© Copyright Journal of Artificial Societies and Social Simulation, 2010