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Putting measures of individual well-being to use for ex-ante policy evaluation

Abstract

Most studies using microsimulation techniques have considered the effect of potential reforms on the income distribution. However, it has become increasingly recognized, both at the academic and political level, that focusing purely on income provides a limited picture of social progress. We illustrate how ex-ante policy evaluation can be performed in terms of richer concepts of individual well-being, such as subjective life satisfaction and equivalent incomes. Our analysis makes use of EUROMOD, the EU-wide tax-benefit microsimulation model, along with 2013 EU-SILC data for Sweden, which for the first time provides information on life satisfaction. Our results show that the effect of potential reforms varies widely depending on the well-being concept used in the evaluation. We discuss the normative questions that are raised by this finding.

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Acknowledgments

This research was supported by the NORFACE ERA-NET (New Opportunities for Research Funding Agency Co-operation in Europe Network) Welfare State Futures Program, Grant Number 462-14-010. The results presented here are based on EUROMOD version G2.35. EUROMOD is maintained, developed and managed by the Institute for Social and Economic Research (ISER) at the University of Essex, in collaboration with national teams from the EU member states. We are indebted to the many people who have contributed to the development of EUROMOD. The process of extending and updating EUROMOD is financially supported by the European Union Program for Employment and Social Innovation ‘Easi’ (2014-2020). We make use of microdata from the EU Statistics on Incomes and Living Conditions (EU - SILC) made available by Eurostat (59 /2013 - EU - SILC - LFS). The results and their interpretation are the authors’ responsibility. We thank the editor and an anonymous referee for their useful comments.

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Correspondence to Erik Schokkaert.

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Jara, H.X., Schokkaert, E. Putting measures of individual well-being to use for ex-ante policy evaluation. J Econ Inequal 15, 421–440 (2017). https://doi.org/10.1007/s10888-017-9370-x

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Keywords

  • Disposable income
  • Satisfaction
  • Equivalent income
  • Microsimulation