20 years of policy impact in Europe
In 2016 ISER celebrates 20 years of EUROMOD, our innovative tax benefit microsimulation model, providing policy comparison between countries across the European Union. EUROMOD is funded by the European Commission and is used for analysis that compares and contrasts policies and their impact on household incomes. EUROMOD Director Professor Holly Sutherland describes its history, how it is currently being used and exciting prospects for the future.
In 1996 the first EUROMOD project explored the feasibility of constructing a 15-country (the size of the EU then) model and built the first 6-country prototype. This was followed by the construction of the EU-15 model, all supported by EU framework programme research funding. These first steps were initiated by a group of academic researchers, already involved in national-level microsimulation-based analysis who wanted to do crosscountry comparative research using these tools, but were frustrated by the lack of comparability of the existing models and household micro-data. The need for an EU-level tax-benefit microsimulation tool was not foreseen either by funding bodies or by policy institutions; it was very much a bottom-up, research-led initiative. This is the first key to its success and longevity.
In 2004 EUROMOD moved to Essex (from Cambridge) and started the process of expanding to cover the (then) EU-25. The software was re-designed, based on experience to date, with the aim of maximising flexibility and transparency at the same time as making the interface as user-friendly as possible. Around this time policy institutions, including the European Commission (EC), started to recognise the value of EUROMOD analysis both at the EU level and in countries without their own national models. Since 2009 the EC (DG-EMPL) has financially supported its extension to the whole EU-28 and the annual updating of tax and benefit policies and EU-SILC based micro-data.
Throughout, we have worked with a specially-created network of national teams from all 28 EU counties (covering the UK ourselves, in ISER), many of whom take full responsibility for the updating tasks and make use of it for their own research and policy analysis. This network has turned out to be the second key to EUROMOD’s success and good reputation. It also provides a good basis for facilitating and supporting its use at national level by scholars, policy organisations and ministries.
A third key to success has been the choice to make EUROMOD freely available for academic and not-forprofit purposes. A new update is released to the user community each year. The number and variety of uses of EUROMOD, in a range of different institutional contexts fully justifies the significant resources (creativity, expertise and commitment as well as finance) that go into developing it.
EUROMOD is now widely used to inform policy at the EU level and nationally including, from many possible examples, as part of the EC evidence base for country assessments and reform recommendations in the European Semester policy coordination process. It is also being used, in collaboration with ISER researchers, to improve the timeliness of information on poverty and income inequality produced by Eurostat which, in turn, will contribute to a better balance between the EU’s economic and social considerations. EUROMOD has been used to evaluate a Minimum Income Guarantee for Greece by the World Bank, to design and test the feasibility of an EUlevel unemployment insurance, to inform the development of Scottishspecific policy in the Scottish Parliament and as the basis for the Austrian social ministry’s publiclyavailable web-based model SORESI.
Academic research using EUROMOD is also a resource base to inform policy makers and, as originally intended 20 years ago, is a unique and multipurpose tool for research on the effects of policy and policy reforms. As demonstrated by the programme of the EUROMOD 20th Anniversary conference being held at Essex in September 2016, the breadth of type of research questions as well as disciplinary context is huge: from the design of Basic Income schemes to the re-design of in-work benefit schemes; from the use of EUROMOD to address macro-economic questions, to the analysis of life course vulnerability to poverty. See the conference programme for more examples!
Thinking first of the immediate future, work is underway to extend the policy scope of EUROMOD using additional micro-data to cover indirect taxes, and experiments are in progress with childcare policies on the one hand and property and wealth taxes on the other.
The next release of EUROMOD will incorporate a state-of-theart hypothetical household tool, allowing the user, in a convenient and flexible way, to generate synthetic on households with characteristics chosen according to the research question being addressed.
The EUROMOD software is sufficiently flexible, adaptable and purposespecific to provide a ready-made platform for developing tax-benefit models for non-EU countries. This has been successfully achieved for many diverse countries including Serbia, FYR Macedonia, Russia, Australia, South Africa and Namibia and is currently underway for 7 more developing countries (see pages 22-23). The EUROMOD community is already global in outlook. Key questions for the longer term are about how best to extend the EUROMOD approach worldwide, both to countries in the developing world without such tools, and to nonEU OECD developed countries for comparative purposes.
Issues to address include the desirable degree of harmonisation and consistency to impose in contexts with widely differing micro-data resources and policy agendas, while not diluting the relatively strong harmonisation and comparability that is possible for a group of countries like the EU. Part of the answer lies in learning from experiments with small-scale innovations and extensions to EUROMOD using micro-data from new sources (e.g. specialised surveys, administrative data or panel data such as Understanding Society for the UK). Another part of the answer may be found through establishing collaborations with other international non-governmental initiatives interested in crossnationally comparable tools for policy analysis.
The key issue may well be funding and promoting the public good aspects of making EUROMOD a global project. And, interestingly enough, this is very close to the main issue that the founders of the EU-15 project were faced with 20 years ago, when the basic idea was born.