COVIVAT Working Paper, 2022, 5

In this paper, we argue that the Covid-19 pandemic highlighted, once again, the necessity for fully utilizing the information on incomes and households gathered by the government, in the evaluation of policy. We demonstrate the importance of capturing heterogeneity in the population and complexity in the tax- and benefit system on the basis of two distributional analyses of the Covid19 income shock. For both analyses, we make use of the microsimulation model EUROMOD and the underlying EU-SILC da…

In this paper, we argue that the Covid-19 pandemic highlighted, once again, the necessity for fully utilizing the information on incomes and households gathered by the government, in the evaluation of policy. We demonstrate the importance of capturing heterogeneity in the population and complexity in the tax- and benefit system on the basis of two distributional analyses of the Covid19 income shock. For both analyses, we make use of the microsimulation model EUROMOD and the underlying EU-SILC data. The two simulations differ in the level of detail and heterogeneity captured in the simulation of the shock on earnings due to the confinement measures and in the modeling of compensation policies. We show that policy-relevant conclusions differ dependent on the level of detail and heterogeneity introduced in the nowcasting techniques. However, even our more detailed nowcasting technique is far from capturing all heterogeneity in income losses and coverage of compensation, which is why we plea for details and heterogeneity in the monitoring of the impact of the Covid-19 crisis, and the evaluation of compensatory policies, and more broadly, for a continued effort to utilize administrative data in microsimulation-based policy-oriented research.