One of the many tools to describe and monitor tax-benefit policies, as well as to carry out both ex ante and ex post policy evaluations, is to work with so-called hypothetical household simulations (or model family simulations). With this type of simulations, the general characteristics of a set of hypothetical households are defined, and subsequently tax liabilities and social benefits and allowances are computed. An example of hypothetical household simulations is CSB-MIPI, a database on the generosity of minimum income protection across Europe. Hypothetical household simulations also come in other formats, for instance when constructing reference budgets.
A disadvantage of databases such as CSB-MIPI, is that it is hard to change the underlying assumptions of the hypothetical households. Therefore, I coordinated with Holly Sutherland (University of Essex), as part of the InGRID project, the development of a new and very flexible tool for hypothetical household simulations in EUROMOD, the microsimulation model for the European Union. With the tool (“HHoT”), hypothetical households can be generated for all EU Member States and all years since 2009. It allows for flexibly specifying ranges of quantitative variables (e.g. regarding age, gross earnings and housing costs), and the use of reference tables so as to express these ranges in relative terms.
- Presentation of the tool and validation study: Hufkens, T., Leventi, C., Rastrigina, O., Manios, K., Van Mechelen, N., Verbist, G., Sutherland, H. and Goedemé, T. (2016), HHoT: A new flexible Hypothetical Household Tool for tax-benefit simulations in EUROMOD, Deliverable D22.2 FP7 InGRID project, Leuven: HIVA, KU Leuven.
- User Manual and basic set of hypothetical households on the EUROMOD website
- Illustration of the tool and the complementarity with population-based microsimulations: Hufkens, T., Goedemé, T., Gasior, K., Leventi, C., Manios, K., Rastrigina, O., Recchia, P., Sutherland, H., Van Mechelen, N. and Verbist, G. (2018), The hypothetical household tool (HHoT) in EUROMOD: a new instrument for comparative research on tax-benefit policies in Europe, EUROMOD Working Paper EM5-19, Colchester: University of Essex. (also published as CSB Working Paper 18/19 and JRC Working Papers on Taxation and Structural Reforms No 05/2019)
In the context of InGRID 2, my colleagues in Antwerp regularly organise a EUROMOD course, which includes extensive training for the use of HHoT.
Other papers that make use of the HHoT:
- Marchal, S., Siöland, L. and Goedemé, T. (2019) Using HHoT to generate minimum income protection indicators, EUROMOD Working Paper EM 4/19, Colchester: University of Essex. (slightly improved version compared to CSB Working Paper 18/20).
- Penne, T. and Goedemé, T. (2019), Putting inadequate incomes at the heart of food insecurity: a study of the financial constraints to access a healthy diet in Europe, CSB Working Paper 19.10 & INET Working Paper 2019-15. Antwerp: Herman Deleeck Centre for Social Policy, University of Antwerp & Oxford: Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
- Penne, T., Hufkens, T., Goedemé, T. and Storms, B. (online first) ‘To what extent do welfare states compensate for the cost of children? The joint impact of taxes, benefits and public goods and services‘, Journal of European Social Policy, [doi]