Project description:
Microsimulation model of taxes and social benefits (MSMTB) calculates for each individual person from a set of microdata the corresponding amounts of taxes payable and social benefits receivable. MSMTBs allow ex ante review of the effects of changes in the tax-benefit system. Therefore, they are particularly valuable in reform analysis and planning. Unlike in other EU countries, where the use of MSMTBs is widespread, the development of MSMTBs in Croatia is still in its infancy. There have been several ad hoc microsimulation analyses by Croatian researchers, while the researchers of the Institute of Public Finance have built a MSMTB prototype. These efforts represent first steps toward accepting microsimulation as a tool in public policy analysis in Croatia. However, much more should be done in inaugurating and promoting MSMTBs.
Therefore, the purpose of this project was to apply microsimulation models of Croatian taxes and benefits in public policy and academic analyses. By applying MSMTBs in analysing contemporary economic and policy problems, the project set out to demonstrate their effectiveness and attempted to attract the attention of public administration leaders (PALs) and academic researchers in Croatia.
The research project had three objectives:
- Develop the microsimulation model of Croatian taxes and benefits – miCROmod – a conventional static arithmetic MSMTB that simulates social security contributions, personal income tax, guaranteed minimum income, child benefit, parental benefits and unemployment benefit. miCROmod was the core around which several supplemental models have been developed, providing additional functions, and included (a) a local government supplement, used for modelling taxes and benefits in the City of Zagreb and (b) a behavioural supplement, simulating the impact of changes of tax-benefit instruments on the labour supply and gross wages;
- Employ miCROmod and EUROMOD in the analyses of tax-benefit reform scenarios. miCROmod and EUROMOD (a comprehensive MSMTB for the EU) was used in the analyses of current issues in the Croatian tax-benefit system. These analyses were to provide insight into the effect of a number of tax-benefit reforms on income inequality, poverty rates and incentives to work. The following reform scenarios have been simulated: (a) Child benefits reform, (b) Personal income tax reform (c) In-work policies in Croatia, and (d) Local social benefits.
- Present the performance of miCROmod and EUROMOD to PALs and researchers.
As part of the project, a
series of professional and scientific meetings were held where knowledge and experience were exchanged on the application of the most modern tools and methods in the analysis of taxes and social benefits.
Details of the project are available in the Croatian Research Information System, the list of published articles in the Croatian scientific bibliography, and the results of the project, the created database (xls) as well as the description (pdf) are available in the Institute's repository.
Program: Croatian Science Foundation research projects