The siena microsimulation model (sm2) for net-gross conversion of eu-silc income variables

In interview surveys collecting information on personal income, the respondents may report income amounts as gross or net of taxes and other deductions. These data must be made homogenous before use for analysis, especially when undertaking comparisons across population groups and countries. The Siena Microsimulation Model (SM2) has been developed as a practical tool providing a robust and convenient procedure for the conversion between net and gross forms of household income. In this paper we describe the logic and structure of the SM2. Starting from data on household and personal income given in different forms, and on the basis of the prevailing tax regime in a country, the SAS routines of the model are designed to estimate full information on income by component, with a breakdown of gross amounts into taxes, social insurance contributions of various types, and net income. Given this specific purpose, SM2 is not meant to be an alternative to general tax-benefit simulation models, but as a complementary tool which those models can usefully exploit. The usefulness of SM2, of course, goes beyond these specific objectives. The distinguishing feature of SM2 is that it can handle diverse tax-benefit regimes using a common logic and a standard set of procedures making it particularly useful for multi-country comparative application; these are explained in the paper in some detail. The immediate context for the development of SM2 has been the requirements of EU-SILC (EU Statistics on Income and Living Conditions). Recently SM2 has been implemented for Italy based on EU-SILC data. The application and some results from it are described. Applications have also been developed for France, Spain and Greece. Selected aspects of these applications are illustrated for France and Spain.