The Use of Hypothetical Household Data for Policy Learning: Comparative Tax-Benefit Indicators Using EUROMOD HHoT

Abstract

Tax-benefit microsimulation models are typically used to quantify the effect of specific policy changes on the income distribution based on representative microdata. Such analysis evaluates policies by considering how different tax-benefit elements interact given personal, household and labour market characteristics. Using hypothetical household data instead helps address broader questions of policy design and systemic (cross-national) differences. This article introduces the Hypothetical Household Tool (HHoT) in combination with the microsimulation model EUROMOD to analyse European tax-benefit policies from a comparative perspective. It presents a series of applications from social welfare analysis illustrating how hypothetical data can benefit comparative academic and policy research.