Assessing the Benefits Reform in Slovenia Using a Microsimulation ...

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households with 112,839 individuals (approximately 6% of the population). It is a merged databasebased on separate files from the Ministry of Finance (containing PIT records), the Ministry ofLabour, Family and Social Affairs (containing records on social benefits), the Ministry of InternalAffairs (containing data on socio-economic characteristics), the Employment Service of Slovenia(containing data on unemployment benefits and labour market status) and the Ministry of Educationand Sport (containing detailed data on scholarship recipients). Since the model is based onadministrative data (not survey data) it is high in quality and enables the simulation of practically alldirect taxes and most benefits at the individual and household levels. The model is static in time anddoes not include changes in behaviour or consequential macroeconomic second-order effects.In the first step of the microsimulation, databases from different sources are prepared in the finalform (final database) which enables the simulations. Since many households consist of two or evenmore families (for example, adults with minor children, spouses and their parents) we imputedfamilies within these households. At the end, our database consists of 112,839 individuals living in57,630 families.Secondly, the benefit system from 2007 is replicated to estimate the quality of the sample. Since theoriginal data also include social benefits calculated by a responsible authority, one might expect the“micro validation” of the model could be done by comparing the benefits calculated by the modelwith the recorded social benefits for each individual in the sample. However, this cannot be done insuch a straightforward way due to a few data limitations:Family income which is the basis for the income test for most benefits refers to the previousyear or even the year before that, meaning that 2006 income data are needed to simulatesocial benefits in 2007. As income data refer to 2007, our assumption is that income levels in2007 are exactly the same as in 2006.Social assistance is a special case since entitlement to social assistance depends on familyincomes in the three previous months. Given the data on annual incomes it is implicitlyassumed that income is received at the same rate throughout the year and monthly incomesare simply annual incomes divided by 12. The actual income position of individuals mightdrastically change during a single year and a three-month average could differ from theannual average. Social assistance is usually not received throughout the year, therefore wetake into account that social assistance is received on average 7.45 months per year (officialdata).Entitlement to some social benefits (social assistance, pension income supplement) alsodepends on family savings and property. Data on savings and property are not included in ourdatabase.4
Due to the lack of data it was impossible to simulate minimum pension support. Therefore weuse data from the dataset.At this stage, a “macro” validation of the model and its database is considered, as evident in Table 1.Child benefit is overestimated when calculated with the microsimulation model by somewhat morethan 10%, which is evident from the table below. On the contrary, the average child benefit from themicrosimulation model and administrative sources almost coincide. The calculated state scholarshipalmost coincides with the aggregate scholarship data from administrative sources. By contrast, thecalculated social assistance and data on minimum pension support 2 do not match the aggregates fromadministrative sources as well as the other two benefits, but the results are still satisfactory.Table 1: Macro validation of the main simulated benefits in a replication of the 2007 benefit systemNo. ofrecipientsin 1000Administrative data Calculated data IndexTotalamount,EUR1,000Averagebenefit(monthly),EURNo. ofrecipientsin 1000Totalamount,EUR1,000Averagebenefit(monthly),EURNo. ofrecipientsin 1000Totalamount,EUR1,000Averagebenefit(monthly),EURChild benefit 379.1 246.0 54.1 426.9 273.1 53.3 112.6 111.0 98.6Social assistance 43.6 107.1 204.6 61.4 99.0 213.8 *140.7 92.4 104.5Minimumpension support45.0 38.3 70.8 39.8 31.8 66.6 88.3 83.0 94.0State scholarship 34.6 64.7 156.0 35.4 65.5 154.3 102.4 101.2 98.9Notes: *The difference in the number of social assistances recipients might be misleading as external statisticsrefer to the average monthly number of recipients, while the number calculated with the microsimulationmodel refers to the total annual number of recipients in 2007.Sources: Own calculations, microsimulation model;Ministry of Labour, Family and Social Affairs, 2011;Institute for Pension and Disability Insurance, 2008.Thirdly, all incomes are updated to 2010 and the benefits system in 2010 is replicated to introducethe changes to legislation between 2007 and 2010. Table 2 shows that the simulation results are lesssatisfying when 2010 is considered. The calculated amount of child benefit and the number ofrecipients are overestimated by more than 15%, though the average amount of child benefit almostcoincides with the average child benefit from administrative records. Similarly, all other calculatedaggregates of social benefits are overestimated, while only the calculated state scholarship coincideswith the administrative data. The calculated minimum pension support 3 is very underestimated whichcan be explained by the underestimated number of recipients in the sample in the first place and thechanged legislation since 2008. The calculated social assistance is considerably overestimated interms of aggregate numbers and in terms of the average benefit level. The lion’s share of thisdiscrepancy lies in the already mentioned strong assumptions and data limitations which are the basis2 Minimum pension support could not be simulated for the policy year 2007 as data on the pension qualifying period arenot included in the sample but are essential for calculating the benefit. Therefore, data taken directly from the sample aretaken into account.5
Page 1 and 2: Assessing the Benefits Reform in Sl
Page 3: definition of income ceilings for s
Page 7 and 8: Child benefit is currently a means-
Page 9 and 10: Currently, the people entitled to c
Page 11 and 12: child benefit for upper secondary s
Page 13 and 14: Table 11: Total effect of the forth

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