Policy effects - EUROMOD estimates
The tables show Policy Effects, computed as the percentage change on mean equivalised incomes due to policy changes, using the Bargain & Callan (2010) methodology. They are computed using the EUROMOD Policy Effects Tool (PET, Basic version) for the two following scenarios:
- Nominal policy effects: This scenario analyzes the impact of tax-benefit policies in year t+1 compared to the preceding year's policies (t), without adjusting for inflation. It reflects the changes in nominal terms, meaning that incomes in t+1 are not indexed for inflation.
- Real policy effects: This scenario assess the impact of tax-benefit policies in year t+1, with incomes adjusted for inflation using the Harmonised Index of Consumer Prices (HICP). This adjustment accounts for changes in in purchasing power and provides a real-term perspective.
Both scenarios are calculated relative to the mean equivalised disposable income in the base year t, providing a comprehensive understanding of how policy changes influence household incomes.
The overall policy effect on disposable Income is decomposed into the policy effects of its income components: including public pensions, means-tested benefits, non-means tested benefits, employee social insurance contribution (SIC), self-employed SIC, other SIC and direct taxes. The results for original income are also offered for transparency, but they are zero because they are not affected directly by policy changes.
Results are offered by decile group and for the whole population (all).
Policy effects capture the first-order impacts of tax-benefit policies, diesentangling them from demographic and labour market changes.
Results are shown in percentage.
For more information on the economic and socio-demographic concepts used, see the EUROMOD Glossary and the list of breakdown variables.
References:
Bargain, O. & Callan, T. (2010), "Analysing the effects of tax-benefit reforms on income distribution: a decomposition approach", Journal of Economic Inequality, Vol 8, Issue 1.