The Non-Behavioral Module of the Italian Microsimulation Model EconLav

This paper presents the non-behavioral module of EconLav, a new microsimulation model of the Italian tax-benefit system which is coordinated by ISFOL with the support of the Ministry of Economy and Finance and the Ministry of Labor. First, we describe a number of data quality issues which often arise in the development of a microsimulation model and the strategies adopted to cope with these issues. Then, we discuss the most important features of our model including estimation of incomes from work hidden to tax authorities, simulation of accounting rules embedded in the Italian tax-benefit system, software implementation and other relevant computational issues. Model's performances are assessed by comparing weighted predictions of the main tax aggregates with the corresponding figures from administrative tax data. Furthermore, we use the non-behavioral module of EconLav to compute marginal effective tax rates (METRs) for different groups of the Italian population