IZAΨMOD - IZA Policy SImulation MODel

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IZAΨMOD, short for IZA Policy SImulation MODel, is the behavioral microsimulation model of the Institute for the Study of Labor (IZA). IZAΨMOD consists of three main components. The basis is a static microsimulation model for the German tax and benefit system. The second module is an econometrically estimated labor supply model, which takes into account behavioral reactions to tax reforms. The third component is a labor demand module, which completes the analysis of the labor market and allows a global assessment of the effects of policy measures. Components one and two are based on data from the German Socio-Economic Panel (GSOEP), a representative panel study of private households in Germany, whereas the demand module uses the German linked employer-employee data set LIAB.
The simulation steps of IZAΨMOD can be broadly described as follows:

1. The current tax system is simulated using the modified data. IZAΨMOD computes individual tax payments for each case in the sample considering gross incomes and deductions in detail. The individual results are multiplied by the individual sample weights to extrapolate the fiscal effects of the reform with respect to the whole population. The result of this simulation is the benchmark for different reform scenarios which are also modeled using the modified database. After applying the current tax and benefit system the disposable income is computed for each household. Based on these net incomes the distributional effects of the tax system at the status quo are assessed.

2. A discrete choice household labor supply model is applied to estimate consumption/leisure preferences of each household using the calculated net incomes and information on working hours.

3. The effects of tax and benefit reforms are analyzed. The reforms will change the net incomes of the households (first-round effect), which in a second step will induce labor supply reactions following the previously estimated consumption/leisure preferences which are assumed to be fix.

4. The labor demand module is employed to estimate how the labor supply reactions translate into employment effects.
 

IZAΨMOD Team
Nico Pestel, Reinhold Schnabel, Sebastian Siegloch, Eric Sommer
Former members: Olivier Bargain, Holger Bonin, Mathias Dolls, Vanessa Dräger, Johannes Hermle, Andreas Lichter, Max Loeffler, Dirk Neumann, Andreas Peichl, Ulf Rinne, Hilmar Schneider, Caroline Wehner
 

Documentation
  • Löffler, M.; Peichl, A.; Pestel, N.; Siegloch, S.; Sommer, E. (2014).
    Documentation IZAΨMOD v3.0: The IZA Policy Simulation Model
    IZA DP No. 8553
 

Publications
  • Sommer, Eric; Pestel, Nico; Schnabel, Reinhold; Siegloch, Sebastian; Spermann, Alexander (2016).
    Ist eine Glättung des Mittelstandsbauchs finanzierbar?
    IZA Standpunkt Nr. 86 published in: Perspektiven der Wirtschaftspolitik, 17 (3), 264—275

  • Arni, P.; Eichhorst, W., Pestel, N. Spermann, A., Zimmermann, K.F. (2014).
    Kein Mindestlohn ohne unabhängige wissenschaftliche Evaluation
    IZA Standpunkt Nr. 65 published in: Schmollers Jahrbuch. Journal of Applied Social Science Studies, 2014, 134 (2), 149-182.

  • Peichl A., Pestel, N., Siegloch, S., Sommer, E.(2014).
    Bundestagswahlkampf 2013: Klientelpolitik durch Steuerreform?
    IZA Standpunkt Nr. 59 published in: Perspektiven der Wirtschaftspolitik, 15(2), 182-194.

  • Pestel, N., Sommer, E. (2013).
    Shifting Taxes from Labor to Consumption: Efficient, but Regressive?
    IZA DP No.7804

  • Eichhorst, W., Hintz, T., Marx, P., Peichl, A., Pestel, N., Siegloch, S., Thode, E.,Tobsch, V. (2012).
    Geringfügie Beschäftigung: Situation, und Gestaltungsoptionen, IZA Research Report No. 7

  • Bargain, O., Dolls, M., Neumann, D., Peichl, A., Siegloch, S. (2011).
    Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency
    IZA DP No. 5440 / CESifo Working Paper 3534

  • Bargain, O., Orsini, k., Peichl, A. (2011).
    Labor Supply Elasticities in Europe and the US
    IZA DP No. 5820

  • Bargain, O., Dolls, M., Immervoll, H., Neumann, D., Peichl, A., Pestel, N., Siegloch, S. (2011).
    Tax Policy and Income Inequality in the U.S.,1978-2009: A Decomposition Approach
    IZA Discussion Paper No. 5910

  • Bargain, O., Decoster, A., Dolls, M., Neumann, D., Peichl, A., Siegloch, S. (2011).
    Welfare, Labor Supply and Heterogeneous Preferences: Evidence for Europe and the US
    IZA DP No. 6102

  • Basso, G., Dolls, M., Eichhorst, W., Leoni, T., Peichl, A. (2011).
    The Effects of the Recent Economic Crisis on Social Protection and Labour Market Arrangements across Socio-Economic Groups
    IZA DP No. 6080 published in: Intereconomics, 2012, 47 (4), 217-223

  • Eichhorst, W., Kendzia, M., Peichl, A., Pestel, N., Siegloch, S. and Tobsch, V. (2011).
    Aktivierung von Fachkräftepotenzialen: Frauen und Mütter
    IZA Research Report No. 39

  • Peichl, A., Pestel, N., Schneider, H., Siegloch, S. (2011).
    Bemessungsgrundlage schlägt Fünf-Stufen-Tarif: Eine Simulationsanalyse des Reformvorschlags nach Rose
    IZA Standpunkt Nr. 36 published in: Wirtschaftsdienst, 2011, 91(5), 328-332

  • Loeffler, M., Peichl, A., Pestel, N., Schneider, H., Siegloch, S. (2011).
    Einfach ist nicht immer gerecht: Eine Mikrosimulationsstudie der Kirchhof-Reform für die Einkommensteuer
    IZA Standpunkt Nr. 44

  • Peichl, A. and Siegloch, S. (2010).
    Accounting for Labor Demand Effects in Structural Labor Supply Models.
    IZA Discussion Paper No. 5350

  • Dolls, M., Fuest, C., Peichl, A. (2010).
    Automatic Stabilizers, Economic Crisis and Income Distribution in Europe
    IZA DP No. 4917 published in: Research in Labor Economics, 2011, 32, 227-256

  • Bargain, O., Immervoll, H., Peichl, A., Siegloch, S. (2010).
    Distributional Consequences of Labor Demand Adjustments to a Downturn: A Model-Approach with Application to Germany 2008-09
    IZA DP No. 5220 published as 'Distributional consequences of labor-demand shocks: the 2008–2009 recession in Germany' in: International Tax and Public Finance, 2012, 19(1), 118-138

  • Peichl, A., Schneider, H. und Siegloch, S. (2010).
    Reform der Hinzuverdienstregeln in der Grundsicherung: Kein Entkommen aus der Transferfalle.
    IZA Standpunkt Nr. 26

  • Peichl, A., Pestel, N., Schneider, H. und Siegloch, S. (2010).
    Alter Wein in neuen Schläuchen: Der Fünf-Stufen-Steuertarif der FDP auf dem Prüfstein.
    IZA Standpunkt Nr. 27

  • Schneider, H., Peichl, A., Pestel, N. und Siegloch, S. (2010).
    Gutachten zur Berechnung von Vorschlägen zur Neuregelung der Erwerbstätigenfreibeträge.
    IZA Research Report No. 32

  • Dolls, M., Fuest, C., Peichl, A. (2009).
    Automatic Stabilizers and Economic Crisis: US vs. Europe
    IZA DP No. 4310 published in: Journal of Public Economics, 2012, 96 (3-4), 279-294 / NBER Working Paper 16275

  • Neumann, D., Peichl, A., Schneider, H. and Siegloch, S. (2009).
    Die Steuerreformpläne der neuen Bundesregierung und das Bürgergeld: Eine Simulation von Risiken und Nebenwirkungen.
    IZA Standpunkt Nr. 21

  • Paulus, A., Peichl, A. (2008).
    Effects of Flat Tax Reforms in Western Europe on Income Distribution and Work Incentives
    IZA DP No. 3721 published in: Journal of Policy Modelling, 2009, 31 (5), 620-636
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  • Peichl, A., Schaefer, T., Scheicher, C. (2008).
    Measuring Richness and Poverty: A Micro Data Application to Europe and Germany
    IZA Discussion Paper No. 3790 published in: Review of Income and Wealth, 2010, 56 (3), 597-619

  • Peichl, A. (2008).
    The Benefits of Linking CGE and Microsimulation Models: Evidence from a Flat Tax Analysis
    IZA DP No. 3715 published in: Journal of Applied Economics, 2009, 12 (2), 301-329

  • Bonin, H. and Schneider, H. (2007).
    Beschäftigungswirkungen und fiskalische Effekte einer Einführung des Solidarischen Bürgergelds.
    (available online)

  • Bonin, H., Rinne, U. and Schneider, H. (2007).
    Untersuchung der beschäftigungs- und finanzpolitischen Auswirkungen des Bofinger/Walwei-Konzepts zur Neuordnung des Niedriglohnbereichs.
    IZA Research Report No. 11

  • Fuest, C., Peichl, A., Schaefer, T. (2007).
    Is a Flat Tax Feasible in a Grown-up Welfare State?
    IZA DP No. 3142 published in: International Tax and Public Finance, 2008, 15 (5), 620-636

  • Bonin, H. and Schneider, H. (2006).
    Workfare: Eine wirksame Alternative zum Kombilohn.
    IZA DP No. 2399

  • Bonin, H. and Schneider H. (2005).
    Wohlfahrts- und Verteilungseffekte eines allgemeinen Freibetrags bei den Sozialabgaben.
    IZA DP No. 1490 published in: Journal for Labour Market Research, 2005, 38 (4), 475-492

  • Bonin, H., Kempe, W. and Schneider, H. (2003).
    Kombilohn oder Workfare? Zur Wirksamkeit zweier arbeitsmarktpolitischer Strategien.
    IZA DP No. 587 published in: Quarterly Journal of Economic Research 72(1): 51-67

  • Bonin, H., Kempe, W. and Schneider H. (2002).
    Household Labor Supply Effects of Low-Wage Subsidies in Germany.
    IZA DP No. 637 published in: Journal of Applied Social Sciences Studies, 2003, 123 (1), 199-208