Combining EUROMOD and LIAM tools for the development of dynamic cross-sectional microsimulation models : a sneak preview

Several years ago, Cathal O‟Donoghue has developed a tool for the development of dynamic cross-sectional microsimulation models : LIAM (Life-Cycle Income Analysis Model). The package has been extended and used in several countries, including Luxembourg, to build dynamic cross-sectional microsimulation models. Regarding the tax-benefit system within such models, one possibility is to implement all needed modules directly following the LIAM framework. Another possibility is to compute benefits and taxes from outside the LIAM dynamic part of the model. This contribution is a sneak preview of how such a combination is possible with the static EUROMOD model (Sutherland, 2007). The objective is served, on the one hand, by composing for the dynamic model a set of input variables closely related to the EUROMOD input dataset. On the other hand, the architecture underlying LIAM shows strong similarities with the one governing EUROMOD, making interactions easier. The role of EUROMOD (or a module strongly related to EUROMOD) might be to take care (in an efficient and flexible way) of most tax-benefit computations, year by year, rather than developing on a separate basis specific modules in the dynamic model. These economies of scale might be of interest, especially (but not only) for little countries like Luxembourg. But a static model like EUROMOD could also take advantage of dynamic procedures made available.status: publishe