Tax-benefit micro simulation model for
Serbia (SRMOD) based on EUROMOD
platform:
construction and first application
Jelena Zarkovic Rakic
Faculty of Economics and FREN, University of Belgrade
(with Mihail Arandarenko, Sonja Avlijas, Sasa Randjelovic and
Marko Vladisavljevic)
Outline
Overview of SRMOD construction
 First application
 Plans

Building SRMOD: initiative
Construction of SRMOD initiated in
October 2009 by the Foundation for
the Advancement of Economics
(FREN), a research institute at the
Faculty of Economics (University of
Belgrade)
 Initiative came as a response to the
growing need for ex ante public policy
analysis in Serbia

Building SRMOD: initiative
Current reform of social assistance
and announced personal income tax
reform
 SRMOD could improve policy makers’
capacity to assess budgetary effects
of alternative tax and benefit policy
solutions, as well as effects of these
changes on distribution, inequality and
poverty

Building SRMOD: first steps
European Center for Social Welfare
 World Bank project: to compile tax
and benefit policy rules for Serbia
following the outline of the country
chapters that OECD member states
compile for the OECD’s Tax and
Benefit model
 Training from ISER consultants: Kate
Wilkinson and Horacio Levy

Building SRMOD: selection of micro
data set



Living Standards Measurement Survey (LSMS),
conducted in 2007 by the Statistical Office of
the Republic of Serbia in collaboration with the
World Bank, was identified as the most reliable
of all available surveys containing micro data on
income and social programmes
(www.worldbank.org/lsms)
Year 2007 also chosen as baseline policy year
The LSMS database was adapted to
EUROMOD so that all variables were formatted
and labelled in such a manner to suit
EUROMOD rules
Building SRMOD: simulated policies

Tax and benefit policies simulated in SRMOD :

Personal Income Tax – on employment income, self-







employment income, rental income, interest, dividend and
lottery winnings
Social Security Contributions (SSC) – on employment
income for full time and part time employment (on behalf of
employer and employee), self-employment income, on income
from agriculture, on unemployment benefit and maternity and
child care salary compensation.
Unemployment benefit
Social Assistance (MOP)
Child Allowance
Birth grant
Maternity and child care salary compensation
Caregiver allowance
Building SRMOD: validation

SRMOD validation: income taxes and SSC
Average wage (in RSD)
Personal income tax
- salary/wage tax
Social security contirbutions - total
Social security contirbutions - on full time employment income
and unemployment benefits

Administrative
SRMOD
records (mil. RSD)
37,668
34,659
8,284,791
6,649,044
6,966,756
5,693,117
20,901,550
25,034,197
20,901,550
Ratio (SRMOD /
Administrative data)
0.92
0.80
0.82
1.20
19,944,627
0.95
SRMOD validation: social assistance benefit and child allowance
Recipients (HHs)
SRMOD
Social assistance (MOP)
Child Allowance
Expenditures (in RSD)
Administrative
Ratio (SRMOD /
records
administrative records)
SRMOD
Administrative
records
Ratio (SRMOD /
administrative records)
53.444
50.848
1,05
274.347.719
253.897.376
1,08
230.093
199.323
0,86
670.238.560
580.706.031
0,86
SRMOD: first application


FREN’s research team commissioned
by the World Bank to test effects of the
new Draft Social Welfare Law on
income and poverty outcomes
New Draft Social Welfare Law, to be
adopted by the end of 2010, intends to
increase coverage and improve design
of the most important last resort social
assistance program (MOP)
SRMOD: first application
New bill introduces changes in social
assistance (MOP) eligibility criteria as
well as parametric change to the
equivalence scale.
 MOP eligibility criteria to be relaxed
for large families and households from
rural areas

SRMOD: first application
We simulated all the changes
envisaged in the new law but it was
also necessary to disaggregate
changes and see their separate
impact on the coverage, average
benefit amount and poverty statistics
 Simulation results were disaggregated
by number of children in HH, HH size
and age groups

SRMOD: future



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Integrating SMROD into EUROMOD
Re-base using EU-SILC as input data (EUSILC for 2011 and 2012 confirmed in
Serbia)
Update policies to EU-SILC data year
Link to labor supply model
Continue simulating important tax and
benefit policy reforms
Inform and train people to use the model