Net Replacement Rates - EUROMOD estimates

The table shows the Net Replacement Rates (NRRs), which measure the percentage of disposable income that is maintained after an individual gets unemployed. Results are produced by the EUROMOD NRR Add-on, which simulates disposable income (and its components) in case of unemployment for all individuals currently in work (individuals with positive earnings in the data). These estimates are average values calculated for the working individuals in the EUROMOD input data, and hence are different from similar indicators calculated based on hypothetical households.

NRRs are usually positive and under 100%, but can be negative (e.g., if replacement income is zero and a lump sum tax is applicable anyway) or exceed 150% (indicating that a person is better off if not working). Although such extreme values are plausible, we excluded them from the presented results to reduce the sensitivity of average NRR to outliers. Total NRR (on disposable income) is also decomposed by income components: benefits (including pensions), direct taxes, and SIC paid by the individual. 

NRRs provide a measure of labour market incentives at the extensive margin: the highest (lowest) the NRR, the lowest (highest) the incentives to take up work.

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:

Jara, H.X. (2024), EUROMOD Net Replacement Rate (NRR) Αdd-on - technical note, European Commission, Seville, JRC136811 (link)