Glossary

Acronyms. Standard abbreviations used for creating standard variable names in EUROMOD.

Administrative data. Microdata obtained from administrative registers, such as census data, personal income tax returns, social security records, etc. EUROMOD can use input data based on administrative data, although they are not part of the public model.

Add-ons. Pieces of standard EUROMOD code (policies, functions, etc.) that are not part of the standard tax-benefit calculations included in the spine, but that can be added to the simulations for specific purposes. Add-on systems can be linked to multiple country systems. The main reason for keeping them separate is to preserve the basic model as clear and straightforward as possible.

At-risk-of-poverty (AROP) gap. Distance of individuals to a poverty line as defined under a criterion. EUROMOD Statistics offer two definitions: the relative median at-risk-of-poverty gap and the Foster–Greer–Thorbecke indices (FGT(1) measure). The former is computed as defined by Eurostat: equivalised income of the median poor divided by the poverty line. The latter is computed as the average relative distance to the poverty line of the whole population (distance is computed as zero for those above the poverty line).

At-risk-of-poverty (AROP) headcount [also referred as rate]. Share of individuals below a poverty line as defined under a criterion. EUROMOD Statistics use the Foster–Greer–Thorbecke indices (FGT(0) measure), which coincides with the Eurostat definition.

Baseline simulation. Simulation that uses a specific baseline system with the corresponding best match dataset.

Baseline system. System that represents the actual tax-benefit rules of a specific country in a specific year. It is usually the reference to assess alternative scenarios.

Base-year simulation. Simulation in which the year of the policy rules matches the income reference period of the input data. The purpose of base-year simulation is to provide information about the actual income distribution in the most accurate way. Thus, aggregate figures of simulated components should match as closely as possible the official statistics.

Benefit Calibration Adjustment (BCA). Extension that allows users to match the simulated total expenditure of a benefit to real expenditure from external statistics. When the extension is on, a subset of eligible observations is randomly selected so that the real expenditure is reached, removing the benefit from the rest of the eligible observations; when off, all eligible observations are kept as benefit recipients. This extension shares most of its functions with the BTA extension. As a rule, only one of the extensions should be on; if both are on, the lowest rate between the take-up rate and the calibration rate is applied.

Benefit Take-up Adjustment (BTA). Extension that allows users to apply non-take-up corrections to benefits (typically social assistance). When the extension is on, a share of (weighted) eligible observations equal to the take-up rate is selected randomly as beneficiaries, removing the benefit from the rest of the eligible observations; when off, all eligible observations are kept as benefit recipients. This extension shares most of its functions with the BCA extension. As a rule, only one of the extensions should be on; if both are on, the lowest rate between the take-up rate and the calibration rate is applied.

Best match dataset. The input dataset that gives the most accurate simulation for a specific tax-benefit system. The result of running a specific system with the best-match dataset is the baseline simulation. If the income reference year of the best match datasets coincides with the policy year of the tax-benefit system, the result is the base-year simulation.

COICOP. The United Nations Classification of Individual Consumption by Purpose.   

Connector. A library/package written for a scientific programming language that allows the user to interact with the model from the other languages. It passes the data in working memory through the model and the model returns the data. EUROMOD can currently be used with Stata, Python, R and Matlab.

Constant. A numeric value saved with a name so that it can be used throughout the EUROMOD spine. Constants can be easily modified, either with the user interface or with connectors. Constants follow naming conventions for easy identification. They are typically used in models to define policy parameters such as marginal tax rates, income bracket boundaries, benefit amounts, etc.

Consumption taxes. Taxes levied on the purchase of goods and services. These taxes can be applied ad valorem, calculated as a percentage of the transaction value (e.g., Value-Added Tax and ad-valorem excises), or ad quantum, based on a fixed amount per unit of the good or service (e.g., specific excises). Consumption taxes are indirect taxes, collected from consumers by businesses on behalf of the government.

Contributory benefit. Benefit where entitlement is dependent on an individual or family’s previous social insurance contribution record.

Country Reports. Reports that document the way in which each country's tax-benefit system is modelled in EUROMOD. They contain, among others, an overview of the tax-benefit system of the country, a technical description of the simulated policies, a description of the input data used in the model and a validation of baseline simulation results in relation to other statistics.

Country-specific extension. An extension that is only applicable to one country.

Consumption taxes (CT) add-ons. Add-ons specifically designed to implement the calculations related to consumption taxes. Since consumption tax calculations are standardized across countries and require a significant amount of code, implementing them as add-ons reduces the complexity of the spine and avoids duplicating calculations across countries. There are four CT add-ons: xbase, xcq, xces, and xcis. The first one simulates the model baseline, while the other three implement different consumer behaviours in reform scenarios: constant quantities, constant expenditure shares and constant income shares respectively.

Credited social insurance contributions (SIC). Contributions paid by the government or social security institutions on benefits.

Data Requirement Document (DRD). Spreadsheet accompanying each disseminated EUROMOD input dataset, including metadata, a codebook with all the variables and information about how they are obtained or imputed.

Deciles. Short name for income decile groups, defined as ten groups of individuals with equal population size sorted by their equivalised disposable income. EUROMOD Statistics use the Eurostat definition for quintile income groups (five groups instead of ten).

Disposable income. Income that is available to an individual or household after direct taxes, social security contributions and benefits are taken into account. In EUROMOD, disposable income is defined as the sum of original income and benefits received minus taxes and contributions paid. The value is recorded at the individual level in the income list ils_dispy, available in the standard output.

Employee social insurance contributions. Social insurance contributions paid by employees on their salaries.

Employer social insurance contributions. Social insurance contributions paid by employers on the salaries paid to their employees.

Equivalence scale. Value used to take economies of scale into account when computing distributional indicators. EUROMOD Statistics use the so-called modified OECD equivalence scale, which assigns a weight of 1 to the household head, 0.5 to other adults (14-year-old or older) and 0.3 to children (below 14).

Equivalised variable. An equivalised variable is the total value of the variable for a household adjusted for the household composition by considering economies of scale. It is computed by dividing the value of the variable at household level by an equivalence scale and assigning it to each household member. The most used equivalised variable is equivalised disposable income, as defined by Eurostat.

EUROMOD Indicators. A set of statistical indicators derived from each public version of EUROMOD.

EUROMOD Online. Tool that provides a simplified access to EUROMOD, with the objective of making it accessible to a wider audience. It allows users to simulate parametrical reforms on personal income taxes, social insurance contributions and family-related benefits. Simulations can be run on either standard SILC-based EUROMOD input data or on a set of pre-defined hypothetical households.

EUROMOD Statistics. Under the name EUROMOD statistics, EUROMOD provides two tools for obtaining statistical indicators using the model's results: the Statistics Presenter and the In-depth Analysis tool.

European Union Statistics on Income and Living Conditions (EU-SILC). A survey that collects cross-sectional and longitudinal data on income, poverty, social exclusion, and living conditions. A processed version of its cross-sectional version forms EUROMOD's standard input dataset, together with information imputed from HBS.

Extension. An extension is a feature that allows the user to switch on and off calculations in the spine. There is a default behaviour set in the country tools through the dialog form Set Extension Defaults. A specific element of the spine, i.e. a policy, function or parameter, can be linked to an extension in the user interface. Linking an element to an extension allows the extension to turn that element on or off.

Extension default. An extension default is a feature that determines the default setting of an extension for a model. It determines if an extension will be by default on, off or n/a (not applicable) when running the model. The default behaviour, if not n/a, can be overwritten from the run dialogue.

Function. Functions are the building blocks of the EUROMOD models. Each function is designed for a specific purpose (e.g. ShedCalc for computing progressive tax schedules, DefIl to define income lists, or Elig to check eligibility options), and they are combined to cumulatively describe the logic of the models. Each function contains one or more parameters; one or more functions make up a policy and run sequentially in the order shown.

Gini coefficient. Inequality indicator that measures the extent to which the distribution of income within a country deviates from a perfectly equal distribution. A coefficient of 0 expresses perfect equality where everyone has the same income, while a coefficient of 1 expresses full inequality where only one person (in an infinite population) has all the income.

Global extension. Extension available in all country models of a project.

Household. A person living alone or a group of persons living together in the same private dwelling, sharing expenses and providing jointly for living essentials.

Household Budget Survey. A survey that provides detailed information on household consumption, income, and socio-economic characteristics, with consumption data recorded at the 5-digit COICOP level. The standardised Eurostat version of HBS data, combined with EU-SILC processed data, form the EUROMOD input data used to extend EUROMOD for the simulation of consumption taxes. This allows for modelling of consumption tax impacts based on detailed consumption patterns.

Hypothetical Household Tool (HHoT). A tool that enables the creation of hypothetical households and the generation of corresponding data based on selected household characteristics.

In-depth Analysis tool. Advanced version of the Statistics Presenter. It offers a set of customisable tables for analysing tax-benefit reforms. Users can customize variables for analysis, breakdown variables, target populations and indicator parameters. Preferences can be saved and loaded for future calculations.

Income lists. Aggregates of several variables, fixed amounts and other income lists, defined within the spine.

Income taxes. Taxes levied on any form of income, e.g. salaries, pensions, rental income, interest income, etc. Income taxes fall on flows, while wealth taxes fall on stock.

Input data. Datasets used as input to EUROMOD. They adhere to a set of technical specifications such as tab-delimited text format, no missing values, one row per individual with identification of household membership, and use of EUROMOD variable naming conventions. Standard input data are based on a processed version of EU-SILC, matched with HBS for data produced from 2024 onwards. Other data sources (e.g. HFCS, administrative data, hypothetical data, training data) can be used as input if properly adapted to follow the abovementioned specifications.

Labour Market Adjustment (LMA) add-on. An add-on that allows users to modify the labour market situation of individual observations, either to adjust the market structure with updated information or to create hypothetical labour market scenarios.

Marginal Tax Rate. Indicator that computes the percentage of an incremental earnings increase that is taxed away due to social insurance contributions, taxes, and/or loss of benefit entitlements. These rates serve as a measure of labour market incentives at the intensive margin of labour supply.

Marginal Tax Rate (MTR) add-on. An add-on that enables the calculation of MTRs for all countries and policy years.

Means-tested benefit. A benefit for which the entitlement or amounts depend on income, wealth or other resources.

Model. In the EUROMOD terminology, model refers to the set of policy rules coded in EUROMOD using the EUROMOD language. Models are saved as xml files and can be accessed either through the user interface or via connectors.

Modelling conventions. A document gathering a list of agreed rules or guidelines that are implemented in EUROMOD.

Naming conventions. Set of rules applied to name variables used in EUROMOD's input and output data. They consist of a list of acronyms that joined together in a predetermined order build the variable's name.

Net Replacement Rate (NRR) add-on. An add-on that allows users to estimate indicators of potential labour supply changes in the extensive margin, considering the influence of the tax-benefit system. The tool computes Net Replacement Rates (the ratio of out-of-work income over in-work income) and Participation Tax Rates (actual decrease/increase in disposable income from discrete changes in the working status).

Original income. Market income with the following components: earnings (+); capital income (+); income from occupational and private pensions (+); property income (+); income received by children (+); regular inter-household cash transfer received (+); regular inter-household cash transfer paid (-). The value is recorded at the individual level in the income list ils_origy, available in the standard output.

Output data. Datasets produced by each system run with EUROMOD. They adhere to the same specifications as the input data, although it is possible to output at the household level (one row per household). The standard output data contain the input data variables plus the variables and income lists simulated by EUROMOD.

Other social insurance contributions. Social insurance contributions paid by individuals other than employees and self-employed.

Parameter. Values that are used as input to EUROMOD functions, determining their behaviour. A parameter can be common to several functions (e.g., parameters defining tax units or variables produced by functions) or specific to a function. They can also be compulsory (the function does not work without including them) or optional.

Policy. Group of functions that calculate a certain component of the tax-benefit. Policies usually correspond to real tax-benefit policies, although the complexity of some tax-benefit policies may require splitting them across several EUROMOD policies. There are also instrumental policies that do not correspond to tax-benefit policies, e.g. uprating incomes, defining tax units, setting default values for variables or defining the EUROMOD output. Any name is technically accepted for policies, but they follow naming conventions so that the user identifies their purpose.

Policy Effects Tool (PET). A tool that estimates the first-order effects of tax-benefit policies on household incomes. It is intended to assist with model validation and compares policies in place in two consecutive years, both in nominal and real terms.

Post consumption tax disposable income. Result of deducting consumption taxes to disposable income. The value is recorded at the household level in the income list ils_dispyPCT_hh, available in the standard output.

Poverty line. Threshold to determine who is at risk of poverty when computing at-risk-of poverty rates and gaps.

Poverty. See at-risk-of-poverty.

Project. In the EUROMOD terminology, a project refers to a specific realisation of the model, which is saved as a folder containing the xml files with the EUROMOD file structure. The user interface points to such a folder and its main task is to allow for visualising, administrating and editing its content. In practical terms this means that users can easily switch from one project to another or generate new projects.

Redistribution. In general terms, redistribution (of income) refers to the  transfer of income from some individuals to others through economic instruments such as taxes and benefits. A usual way of measuring redistribution is by comparing inequality before and after taxes and benefits. By using the Gini coefficient to measure inequality, we can compute redistribution as Gini of income before taxes and benefits minus income after taxes and benefits, where positive (negative) numbers indicate positive (negative) redistribution, i.e. taxes and benefits make the distribution of income more (less) equal.

Self-employed social insurance contributions. Social insurance contributions paid by self-employed individuals.

Simulated variable. A variable resulting from a simulation, marked with the postfix _s in EUROMOD.

Social Insurance Contributions (SIC). Contributions made by individuals or employers to social insurance programs, such as unemployment insurance, pension schemes or health systems.

Software. The EUROMOD software consists of the EUROMOD user interface and the EUROMOD executable. Moreover, the software comprises some additional programmes and files required by the model: the programme that provides built-in help and some configuration files. All these parts are installed, and respectively updated, by the EUROMOD installer.

Spine. Ordered list of policies that are evaluated sequentially.

Standard income list. Income lists that are common to all EUROMOD systems. They are identified by the prefix ils_. Non-standard income lists are identified by the prefix il_.

Standard output data. Output data produced by default by EUROMOD at individual level, containing the variables and income lists simulated by EUROMOD, together with the input data variables. The definition of the output is controlled by the policy OutputDef_CC, which produces a dataset with the postfix _std.

Statistics Presenter. A tool that generates fixed sets of statistics from EUROMOD output files, offering aggregates and distributional indicators for incomes, taxes and benefits, including inequality and poverty indices. The results are displayed on screen and can be saved in excel format.

Survey data. The resulting data that is collected from a sample of respondents that took a survey.

Switch. A label indicating that a policy or function is linked to an extension and cannot be turned on or off manually.

Symbolic Identifier. Each EUROMOD element such as a policy, a function or a parameter is linked to a symbolic identifier. These are based on the policy name and, if applicable, the position of the function or parameter within that policy. They are used mostly in add-ons to allow changing the values of parameters, functions or policies in a non-system-specific way.

System. It refers to the rules necessary to simulate a particular tax-benefit system, either an existing one (e.g. the DK tax-benefit rules for 2024) or a reform scenario. Each system is shown as a column in the spine. Usually the name (e.g. DK_2024_ref1) contains the country code (DK), the year (2024) and (if not the baseline) a name for the specific reform scenario (ref1), separated by underscores.

Tax Compliance Adjustment (TCA) add-on. An add-on that makes it technically possible to account for varying degrees of income misreporting and income tax compliance of different types of households in simulations for all 27 EU countries in a highly harmonised way.

Tax Unit (TU). Group of individuals belonging to the same household whose socio-economic characteristics are assessed jointly to compute a specific tax or benefit. The smallest tax unit comprises a single individual and the largest comprises the whole household. Some policy instruments require a subgroup in between, e.g. parents with their children. Although a more precise name would be “assessment unit”, tax unit is used for historical reasons.

Training data. EUROMOD hypothetical input datasets specifically designed for training purposes. To facilitate the interpretation of EUROMOD results, they were designed to roughly mimic some socioeconomic characteristics of the countries’ population.

Unique identifier. Each EUROMOD element such as a policy, a function or a parameter is linked to a unique identifier. More precisely, identifiers are system-specific, which means that each policy, function or parameter possesses one unique identifier per system. These unique identifiers are assigned once a component is created and kept for the whole lifetime of the component. For convenience, symbolic identifiers are usually used instead of unique identifiers.

Uprating factors. Indices used to uprate monetary variables from the income reference period to the policy year when these two do not match. This is done by using relevant constants in the models, called uprating factors. The guidelines for deriving uprating factors for market incomes as well as pensions, non-simulated benefits, and other sources of income/expenditure can be found in the EUROMOD Modelling Conventions.

User Interface (UI). Graphical interface that acts as the central access point of the model. Its purpose is to help users to orientate themselves within the options provided by the model and around the model. It provides users with the means to open, view, edit and run the different countries, systems and add-ons included in the model. It also provides access to the various tools that are included in the EUROMOD software.

Variable. EUROMOD uses four types of variables: 1) variables contained in its input data; 2) variables simulated by the model (marked with the postfix _s); 3) intermediate variables (usually named as i_*); 4) special-purpose internal variables. Variables of type 1 and 2 are described in a special EUROMOD parameter file, the variable description file, which can be accessed from Administration Tools. Variables of type 3 are defined by using the EUROMOD function DefVar. Variables of type 4 are produced internally by the model to fulfil specific functionalities.

Wealth taxes. Taxes levied on any form of wealth, e.g. immovable property, financial assets, vehicles, etc. Wealth taxes fall on stock, while income taxes fall on flows.

XML files. In EUROMOD, the xml format is used to store all the information of the model, e.g., country systems, add-ons, variable names, etc. A set of xml files organised following a specific structure makes up a project.