Reducing child poverty in Europe: What can static microsimulation models tell us?

Static microsimulation models are based on household micro-data and are designed to estimate the revenue cost and distributional and incentive effects of tax and benefit policy changes. They are invaluable for the design and evaluation of policy reforms. Static models allow us to hold constant many variables so that we can focus on the aspects of interest. This paper illustrates the range of ways in which static microsimulation can help us to develop policy to reduce child poverty, with reference to some concrete simulation exercises. It also outlines the situations where other types of modelling are complementary and attempts to put all modelling in perspective. The first illustration shows how static microsimulation has been used to gauge the effect on child poverty of the recent UK tax-benefit reforms. The second illustration presents some early results from EUROMOD which explore the relationships between child poverty and the scale of cash benefits and tax concessions targeted on children in four countries of the European Union: Denmark, France, Spain and the UK.