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LINDA manual - National Institute of Economic and Social

1. FORM AZ TAX CREDITS WORKING LIFETIME Form A2 TAX CREDITS WORKING LIFETIME 8 Working Tax Credit Child Tax Credit Benet rates Benefit rates basic element 1658 05 Epa family element 547 5 Epa couples lone 1642 5 Epa child element 1766 6 Epa parent addition sh Mei nic 682 95 ees Thresholds and withdrawal rates minimum benefit 26 071428571 D 4 cil li 14155 221428 P a e mA first withdrawal 37 minimum age for lasi rate receipt second 49999 785714 Pa Allowable oiid care threshold one child 70 p w att aay ae 6 6666666666 7 two or more 100 E p w children cost covered a0 a Thresholds and witharawal rates first threshold 532002149858 D 3 EUER MARUN first withdrawal 37 gin RESET rate i second i 5744 p a kara 49999 7857 14 BACK second 6 6666666666 withdrawal rate The parameters of the Working Tax Credit and the Child Tax Credit can be altered via Form A2 The 30 hour element of the WTC is considered to be awarded in respect of full time employment of at least one adult household member In the case of both the WTC and the CTC the first withdrawal rate applies to gross income earned between the first and second thresholds and the second withdrawal rate to gross income earned in excess of the second threshold until the respective benefit is exhausted If Universal Credit is selected for analysis in Form 1 then only those parameters that are releva
2. Credit is selected in Form 1 19 Page FORM A8 INDIRECT TAXATION FORM A8 INDIRECT TAXATION o I model consumption taxes if not then can ignore remainder of this form Indirect tax rates VAT full rate 175 Of alcohol 33 Of VAT reduced rate c tobacco g insurance premium g fuels ag tax standard rate insurance premium 30 tax higher rate ENTER ENTER and RUN LINDA can be directed to include an allowance for indirect taxes in the simulated analysis In this case the model uses reduced form regression equations to disaggregate aggregate consumption which is simulated endogenously into the consumption categories that are subject to alternative tax rates The model therefore accounts for income effects associated with indirect taxes ie the reduction in aggregate purchasing power but not price effects ie the influence of indirect taxes on relative prices of alternative consumption subgroups Please contact the NIESR for further details 20 Page contributory Pension l value of pension depends on years of contributions modelled on basic State Pension i tick if included in simulations tick if simulated endogenously maximum value of pension single adult maximum value of pension couple contrib years for maximum benefit 30 contribution years to obtain minimum ben min employment income to qualify benefit growth pre state pension age benefit growt
3. O The MODULE global_tax includes a series of variable type definitions and no subroutines The variables defined within this module are referred to as global variables This is because it is possible to share them between alternative subroutines without the need for explicit declarations e The global variables defined in MODULE global_tax are assigned values within the SUBROUTINE initialise_taxinputs see Figure 1 found in the source file 1_TaxTools f90 38 Page o Note that SUBROUTINE initialise_taxinputs is given access to the global variables by the USE global_tax declaration at line 23 e Any SUBROUTINE that subsequently requires access to the global variables need only include the declaration USE global_tax in its second line of code as outlined above for SUBROUTINE structure Programming ANALAYSIS Routines In this section we provide an outline of the structure of the analysis solution that is provided with the model We then work through a practical programming example that new users may find useful before describing how a new analysis routine should be included in the solution Outline of the analysis solution The analysis solution can be opened in the VS 2010 environment by double clicking the file analysis sin The program files of this solution are organised as follows 1 The file O_entry f90 is the point of entry into the program structure 2 A series of global
4. Each source file can contain one or anumber of MODULEs o AMODULE is predominantly a container to organise a number of SUBROUTINEs e g MODULE AA might contain SUBROUTINEs AA1 and AA2 and MODULE BB might contain SUBROUTINEs BB1 and BB2 a slight complication arises in relation to global variables which is returned to below Most MODULEs are organised as follows o MODULE AA This line denotes the start of the MODULE with the name AA o IMPLICIT NONE This line is necessary to avoid easy programming errors do a google search on it for further detail o CONTAINS This line notes that the SUBROUTINES that follow are contained within the MODULE o SUBROUTINEs then appear here o END MODULE AA This line denotes the end of the module All of the program computations are undertaken by code that is organised within a series of SUBROUTINEs o e g SUBROUTINE AA1 x y takes a series of inputs x performs a number of calculations and then returns a series of outputs y We would execute this subroutine by entering the following code call AA1 x y To use call SUBROUTINE XX from within SUBROUTINE YY either o the two SUBROUTINEs must be organised within the same MODULE or SUBROUTINE YY must be given access to the MODULE containing SUBROUTINE XX e g inthe above example SUBROUTINE AA1 could call AA2 by default but would need to be given access to MODULE BB to call BB1 or BB2 Each SUBROUTINE must be organised as foll
5. generated by the compiler all of which start with ANALYSIS Run a Test Analysis The VS program environment provides sophisticated debugging tools to help you identify problems with your code We will run through some of the basics here which will help you get started 1 Ifyou have not done so already run the model through for the first time see creating a simulation base under Section 2 2 Set up LINDA to make use of your new analysis routine a Open job file xls b run macro SIDD Alt F8 select SIDD and run c Type the name of an existing simulation into the text box under the title NAME OF EXISTING RUN TO ANALYSE Press the ANALYSIS OF EXISTING SIMULATION button Type DA1 into the text box alongside the title Analysis routine 1 Press the ENTER AND RUN button Press the EXIT button Save job file xls za O a 41 Page 2 Adda break point to your subroutine A break point is a marker which tells Fortran to pause and wait for instructions if it is ever asked to execute a specific line of code We will add a break point where the analysis routine identifies population ranking based on lifetime equivalised income a O o Clear all break points e Select the Debug menu from VS and select Delete all breakpoints Search for CNTRL F deciles based on lifetime income Put the cursor at the beginning of the line aa_min 1 press F9 or press the
6. open up the TAXES subdirectory and double click on TAXES sIn a This should open the Visual Studio program environment 3 If you can see the solution explorer window then select the purple box a If you cannot see the window then open it through the View drop down menu In the Project drop down menu at the top of Visual Studio select Properties In the Configuration drop down menu select All configurations Inthe Platform drop down menu select All platforms Iepr opi e Under the Configuration Properties select the General category The model is delivered on the assumption that you have a 64 bit operating system Please contact the NIESR if you require files to run on a 32 bit system 3 Page 8 Against the Output Directory replace C MyFiles MODEL_LAB MODEL with the file location that you have saved the model into 9 Under the Configuration Properties select the Debugging category 10 Against Command enter the location of the file SIDD exe eg C MyFiles MODEL_LAB MODEL SIDD EXE 11 Against Working Directory enter the same text as under 8 12 Press the Apply button and then the Ok button 13 Under the File drop down menu select Save All 14 Under the Build drop down menu select Configuration Manager 15 Under the Active Solution Configuration select complete 16 Under th
7. A6 SUPLEMENTARY BENEFIT LIMITS ccccccccccccessssseeceeccccesseeessseeeceeeesseeeaaaseseeseeeseeaaaaes 18 FORM A7 UNIVERSAL CREDIT ccccccccceccccceeeseseescceceessaeeeeseeceeccceessaeassseesceeeeesssaagaasesceeeeesseauanes 19 FORM A8 INDIRECT TAXATION scccccccccsscsssseeeceecesseeeessesseeeeeceesesaasaseeecesccesseecaasecseeseeesseneaaes 20 FORM C1 STATE CONTRIBUTORY PENSIONS ccccccccccessesseeccececeeesseeesseeeecceceesseaeasssesceeeesseaaaeaes 21 FORM C2 NON PENSION WEALTH ccccccsssssssseeceeccccecceesssseeeceeceessanessseeeceecesseaceassesceseeesseeeeaaes 22 FORWIECS PRIVATE PENSIONS ssrin E AA snanibaoeueereiomediacseonss 23 FORM C4 VARIATION OVER PRIVATE PENSION ELIGIBILITY 0 0 0 0 cccsesssseeeececeecseeeseseeeceeeeeseeseeeees 24 FORM C5 PRIVATE PENSIONS CONE sisicssissansssssnsciseseesssdiesavensoassbaedendanaaderensarssdhasiantvbebes donee detaiaaies 25 FORM CO ESCALATION reparieren niie enaa tin UNEEN AAEE TREERE 26 FORM C7 SELF EMPLOYMENT sesssrerssrsassierisirian nirani orian rison re nE E REE AEE RIA ERE ENE RENIE 27 FROM C8 GRADUATE STUDENTS ON ENTRY TO SAMPLE cccccccccssessssseeececeeseeaeaesesececeeeseeaueaees 28 FORM D1 SHORT RUN ANALY SIS ernes nin A E 29 FORM D4 ANALYSIS OF TAX FUNCTION csssssesccecceceseseseeecceceecesseeeseeeeeceeeesseaeaaaeeeceeeeesseaaagees 30 FORM Z RON MODEL seeriana r eo earnest EAO OAOE SO OAN 31 SIMULATION
8. The user can request that the model run a series of alternative analysis routines in addition to those that it runs for each simulation by default The top panel of this form allows the user to request that the model run analysis routines that they have programmed themselves How to program up this type of routine is discussed in Section 5 The name of the respective routine should be entered into one of the text boxes provided bearing in mind that these names are case specific The model can also be requested to run a series of pre packaged routines The first reports means and variances of income by age and year The second set reports a selected summary Statistics for given population cross sections and the third reports selected summary statistics for given birth cohorts All of these statistics are reported in Excel output files income_moments xls files ending 10 Page XXXXcs xls for cross sectional statistics and files ending XXXXby xls for birth cohorts where XXXX refers to the relevant year Finally the model can be asked to produce a series of simulated averages for population deciles specified by equivalised disposable family income The revised OECD equivalence scale is used to adjust disposable income of families for size If the model is directed to analyse data for a population cross section then the relevant year should be included in the form as directed Otherwise the birth year of the cohort of inte
9. and benefits structure beyond simple parameter adjustments or who wish to write their own analysis routines for integration with the model will also require Intel Fortran Studio XE or Intel Parallel Studio XE Loading the model onto a new computer The model is delivered as a single zip folder The folder includes two subdirectories FORTRAN and MODEL The FORTRAN subdirectory includes the programming code for the ANALYSIS and TAX routines that are provided with the model The MODEL subdirectory includes all of the files that are required to run the model The MODEL subdirectory contains two subdirectories in addition to a set of model files The subdirectory BASE_FILES contains a separate subdirectory for each base specification that you create with the model in which files that are required for the respective base specification are stored as discussed in the section concerned with FORM 0 that we return to below The subdirectory SIMULATIONS will contain a separate subdirectory for each simulation that you run in which are stored the panel data generated by the model model parameters and excel simulation output Please follow these steps when installing the model on a new computer 1 Extract the zipped files from the compressed folder to a subdirectory of your choosing maintaining the directory structure that we have included with the zipped file USERS WITH FORTRAN ALL OTHERS SKIP TO STEP 19 2 Inthe FORTRAN subdirectory
10. can be defined to consider the circumstances of students in tertiary education A student at entry to the sample is considered to remain a student until their respective graduation age Graduation ages can take one of two values where type 1 students are considered to graduate before type 2 All individuals identified as students at entry to the simulated sample and over the graduation age for type 1 but not type 2 are identified as type 2 students An exogenously defined fraction of individuals identified as students and under the graduation age for type 1 students are defined as type 1 and the remainder as type 2 students All individuals identified as students and over graduation age 2 are ignored Achieving graduate status is uncertain and depends upon an exogenously defined failure rate These parameters can be set in the top half of form C8 28 Page FORM D1 SHORT RUN ANALYSIS FORM D1 SHORT RUN ANALYSIS NAME OF FILE TO STORE SIMULATION OUTPUT TICK IF 2 TRANSITION YEARS DEFAULT IS 1 TRANSITION YEAR S NAME OF EXISTING RUN TO ASSUME FOR STARTING ENVIRONMENT NAME OF EXISTING RUN TO ASSUME FOLLOWING FIRST TRANSITION NAME OF EXISTING RUN TO ASSUME FOLLOWING SECOND TRANSITION fhe model by default calcueates diference statistics with respect to the starting envranment F you would prefer these to be calcueted wat respect to another envwronment please indicate so below TICK IF DIFFERENCES CALCULATED TO
11. in risky assets alowed I tick if unsecured debt alowed tick if investment in ISAs allowed remaining parameters in this sheet can be ignored if ISAs are suppressed annual ISA contribution limit 000 expected rate of return to 4 052346258 0 ISA savings std dev of return to ISAs 17 set this to zero if certain decision cost of ISA 0 account set up ENTER and RUN This form defines parameters that determine the types of non pension assets that the simulated population has access to Save liquid assets are allowed for by default The user can also specify that the simulated population can allocate some of their liquid wealth to a risky investment asset whether the simulated population has access to unsecured credit or whether they are able to invest in an Individual Savings Account ISA If ISAs are included for analysis then parameters governing the terms of this asset class can also be amended 22 Page FORM C3 PRIVATE PENSIONS FORM C3 PRIVATE PENSIONS Private Pension Superannuation Parameters lower income 393 4 p w I tick if participation endogenous threshold tick if contribution rate endogenous no of pensions 1 available up to 5 W tick if any private pension available l model default options over pension Piate Penson I Private Penson 2 Private Penson 3 6 Povete Penson Private Pension gt minimum employee EDN ise amd hia a f fiu o aad hea am contributio
12. individual type oes ENTER and RUN The model includes two methods for analysing the tax function The first focuses upon a user defined household type with specific measures of private earnings and the second considers a set of broad circumstances that are designed to capture a population cross section Input statistics and analytical results for each of these two routines are communicated respectively through the files tax_test xls and tax_test2 xls located in the assumed base directory defined in cell E27 of the input sheet of job file xls 30 Page FORM Z RUN MODEL ORMZRUNMOOL D COURSE MODEL fast model that provides a course approximation of agent behaviour C MEDIUM MODEL FINE MODEL slow model that provides a fine approximation of agent behaviour BASE Specification using the same model specification i as the base will aid comparisons META ge adjust wages and interest rates to E reflect labour and capital supply This final form allows the user to run the model to exit the model or to go back to Form C8 The analyst can choose one of four options for running the model Running the course model achieves a fast run time but at the cost of numerical accuracy This option should be used for exploratory analyses only At the other end of the scale running the fine model implies a relatively long run time to obtain a high degree of numerical accuracy An intermediate option
13. key household income consumption and balance sheet items are reported in one table and statistics relating to the macro economy are reported in the other The population averages that are reported in the first table are reasonably self explanatory The statistics relating to the macro economy however warrant future comment Economic analyses of the type for which LINDA has been devised can typically be distinguished in relation to their treatment of factor prices On the one hand partial equilibrium analyses assume that factor prices are fixed this is also commonly referred to as the small open economy assumption On the other hand the alternative assumption is that factor prices adjust endogenously to reflect changes in demand and supply In the case of LINDA the analyst can choose between these two basic frameworks as noted in relation to Form Z Here directing the model to generate results for the General Equilibrium in a closed economy results in the model adjusting 33 Page interest rates and wage rates to reflect changes in the supply of capital and labour that are implied by the respective simulation The basic idea is that if saving increases then this raises the supply of capital in the economy Increasing the supply of capital in the economy all else held fixed should reduce the rate of return paid to capital This is simulated by LINDA on the assumption that aggregate production Y combines aggregate capital K and labou
14. left mouse button while holding the mouse pointer over the grey bar e A red dot indicating the location of the break point should appear where the red break point should appear 3 Launch the debugger a Select the Debug menu from VS and select Start Debugging or press F5 e The model should start to run and will pause for a while while it loads the simulated population characteristics before the code stops at the break point that you have set indicated by a yellow arrow 4 Start analysing the code a You should feel free to play around with the debug environment which has a large number of very useful tools Some of the most important of these include e the watch windows accessed through the Debug Windows Watch menu options These windows allow you to add in variables that you are interested in seeing the current value of Adding the value pop numb in one of these windows for example should indicate the population size e walking through the code achieved by pressing F10 e skipping to the next line of code by pressing F5 e you can also drag the yellow arrow and drop it at any point in the code that you like The program will then proceed forward from that point A screenshot of what you might see is provided below Here the debugger has been organised with two Watch windows side by side at the bottom On the left we have srt which lists the index numbe
15. parameters projects associated panel data staring from the prevailing simulation base output ina standard format csv and calculates a set of associated summary statistics output to Excel 3 Analyse the model output Although users are unable to access the source code of the main executable program they are able to alter in any way that they like the auxilliary files that implement taxes and benefits in the model This manual also provides a brief description of how the tax and benefit code considered by the model can be altered The manual is divided into four sections Section 2 describes how the model should be set up for the first time on a computer which includes use of the Excel front end Section 3 describes how to use the Excel front end which guides a user through adjustment of selected model parameters Section 2 Page 4 describes the output generated by the model and Section 5 provides some pointers for those interested in altering the tax and benefit programing code 2 Set up System requirements LINDA is designed to operate on desktop workstations that use Intel processors and the Microsoft Windows operating system We recommend minimum system specifications of a 64 bit operating system computing processor s with at least 6 physical cores 8GB of RAM and 500 GB of hard disk space Microsoft Excel is required to analyse summary statistics reported by the model Furthermore users who intend to alter the tax
16. total wealth and sim_output_lifetime ranks by average net income earned during the entire simulated life course The threshold cut offs that define respective deciles are also reported in the right most columns of each sheet The decile level analysis is carried out for the following variables Table 1 Data in Analysis_Dec xls and Differences_Dec xls Notes and Definitions number of adults Shows how household size changes with age of family reference person consumption Consumption including non discretionary costs met by the household for housing and child care per week leisure This is the proportion of the leisure available to someone who does not work Someone who works full time is defined as having leisure of 0 5 The ratio of the part time working week to the full time working week is user determined in Form 1 as Part time Ratio 1 for single people and the Lab Ratio variables for couples proportion employed Proportion of population with any employment Average income from employment per week 35 Page average contribution to Average employee and employer contributions to private pensions over private pension decile per week propn contributing to Proportion of decile making any contributions to private pensions private pension private income private income gross labour income investment income on non pension wealth interest on debt private pension contributions per
17. 0 1 0 05 0 05 0 0 3 priv inc Old Age Benefits Means tested ben Housing beneft Counci tax beneft gt r min absolute value 20 20 EO p w ENTER and RUN min relative value o oa oos priv inc This form is designed to provide a stylised account of incomplete benefits take up Two thresholds are applied to each of the schemes that are referred to in this form an absolute minimum benefit threshold specified in per week and a minimum relative value specified as a percentage of private income If the benefit to which a given family fails to exceed either of these thresholds then the family is assumed not to apply for the associated benefit 18 Page FORM A7 UNIVERSAL CREDIT Disregard floors tax unit disregard o E p a couple addition Epa lone parent addition s000 p a lone parent addition p a singles addition p a singles addition 700 8 83 E p a parents incl LP p a first child addition 520 p a addition extra chidren addition 0 E p a second child addition 960 E p a third child addition 360 p a Reduction rates Asset tests taper rate lower capital limit 6000 housing benefit 15 o upper capital limit 16000 E reduction council tax benefit 0 Yo withdrawal rate above 350 ca reduction lower limit ENTER ENTER and RUN RESET BACK This form allows the user to input parameters defining Universal Credit It only appears if Universal
18. 99 og p a 50 wdrwl 50 ratei ENTER ENTER and RUN RESET BACK The form reported here is for the 2010 tax structure and a slightly different form is presented for the 2006 tax structure This form allows the user to specify the structure of income tax and national insurance Consistent with contemporary tax policy in the UK income taxes are calculated on individual specific taxable income obtained by subtracting an individual s Personal Allowance from their gross income There are six possible tax rates and two national insurance rates The first tax rate applies to taxable income up to the 2 Tax Threshold the second tax rate to the 3 Tax Threshold and so on Similarly Rate 1 NICs are applied to taxable income between the Primary Threshold and the Upper Earnings Limit and Rate 2 applied to taxable income in excess of the Upper Earnings Limit Individuals under state pension age and with a taxable income in excess of a Wdrwl Threshold have their Personal Allowance reduced at the rate PA Wdrwl Rate The adjustment of the Personal Allowance for people over state pension age is somewhat more complex In this case the Personal Allowance is withdrawn at Wdrwl Rate1 on taxable income between 1 lower threshold and 1 13 Page upper threshold and is withdrawn at Wdrwl Rate2 on taxable income in excess of 2 lower threshold
19. ALYSISROUTI a e Bae Ol Ea Ble o c x DeveloperRoutines 90 x 45 DeveloperAnaysisRoutnes Jeon OO OOOO y OV E identify net equivalised income deciles based on lifetime income FEE EEE ES EE ES EE EEE ES EE ESE EEE EEE ES ESE EE ESE EEE EEE EES EEE SESE SESE ESE EEE EEE tine decile 1 ny_eq 0 0 do ii 1 pop_numb consider each individual in turn tot_pop 0 0 do tt 1 SamplePeriodAll loop over all simulated periods 4340 dxq wes Au 1310 dxg Uonnjos e P if age ii tt gt 001 and age ii tt 1t 85 5 then individual observed in this period tot_pop tot_pop 1 0 ny_eq ii ny_eq ii net_income ii tt eqs ii tt end if end do ny_eq ii ny_eq ii tot_pop end do call mrgrnk ny_eq srt aa_min 1 do aa 1 n age Value Type D ny eq srt l 3 00732000000000 REAL P nyeta _ 78 2349831501831 Q gt REAL ny_eq srt3 84 9213480392157 REALG INTEGER g ny_eq srt 4 86 3623529411765 _ l _ amp gt REAL amp INTEGER a ny_eq srt 5 88 0512835820896 a v REAL 8 Q INTEGER ny_eq srt 6 89 9381470588235 3 v REAL P ny_eq srt 7 911705245098039 A REAL El Watch 1 k Watch2 Call Stack F Breakpoints E Command Immediate Introducing a new analysis routine There are four key steps that you will need to take to run a new analysis routine for an ex
20. BASE CALIBRATION EXISTING RUN TO USE AS REFERENCE FOR DIFFERENCE STATISTICS BACK START ANALYSIS The LINDA model can be used to gain an appreciation of the medium term behavioural implications of a policy change Specifically it is possible to consider how a population cross section will evolve through time if they were confronted by a series of unexpected changes to the policy environment Up to two policy changes can be considered during any given model run To undertake this type of analysis the user should do the following 1 Run each of the policy scenarios that are of interest as described in Setting up a New Simulation below choosing any run names that you prefer 2 After completing the simulations in 1 re open job_file xls start the SIDD macro and press the UNDERTAKE SHORT RUN ANALYSIS button 3 Enter the name of the folder in which to store the short run output in the top text box of Form D1 29 Page 4 Enter the transition year s in the text boxes as indicated The second right most box should only be used if two transition years are indicated and should be greater than the first 5 Enter the run names defined in 1 in the remaining text boxes 6 Press the START ANALYSIS button FORM D4 ANALYSIS OF TAX eee Did you want to analyse the tax schedule of a single type of individual tax_testi xls or for a flexible population cross section tax_test2 xls C Flexible
21. Form A4 allows the user to set the terms for means tested benefits such as Jobseekers Allowance Incapacity Benefit and the Pension Credit all of which are withdrawn in response to private income Universal Credit will replace Jobseeker s Allowance However the full form will continue to appear when Universal Credit is selected as Universal Credit is based on some of the same parameters as Jobseeker s Allowance Note here that the model only considers Incapacity Benefit as a vehicle to fund early retirement The model does not allow for heterogeneous health status of the population In additional to income tests assets tests can be applied to means tested benefits In the pre packaged tax and benefit schemes assets tests are accommodated by 1 calculating an implicit rent flowing from household assets 2 adding the implicit rent to other household income 3 applying the aggregate income to the relevant income test This form also allows the user to input parameters in relation to flat rate benefits namely Child Benefit and the State Pension 16 Page FORM A5 AGE THRESHOLDS FORM A5 AGE THRESHOLDS Incapacity Benefit Age model Incapacity Benefit as a vehicle to fund early retirement if no can ignore following parameters back in time base year forward in time age 5 ES 55 pss fe BB from year 1925 194 19 3 2020 2036 2046 Pension Credit Qualifying Age allow age of eligibility for Pension Credit to differ from State Pens
22. Most of the key model parameters are stored in the spread sheet job file xls Altering this file name may prevent the main executable file SIDD exe from locating the model parameters Job file xls is comprised of a number of worksheets The parameters which drive the model are present in the worksheet input Parameter values of the base simulation are stored in the sheet inputA Expert users can make changes directly to the parameters described in the input worksheet without recourse to the user front end Alternatively the front end system of forms that is included with the spread sheet can be used to alter a selected set of model parameters Differences between the data stored in the input and inputA sheets are identified by 1s in the check sheet Any other sheets included in job file xls are beyond the scope of this manual To use the front end users should open job file xls and run the macro SIDD visible in the Tools Macros window AIt F8 This displays Form O FORM 0 LINDA SIMULATION FORM 0 INDA SIMULATION location of existing job file to load model parameters from e g c new_base job file xls leave blank by default name to adopt for existing job file RUN EXISTING JOB FILE base_pop name of run to analyse A if this is left blank then the model will analyse ANALYSE TAN FUNCTION the tax function that is assumed by default name of run to analyse ANALYSE EXISTING SIMULATIO
23. N name of run to adopt Starting year for new directory name for new as new base base simulations base e g base 2006 CONVERT RUN TO NEW BASE 2006 location of existing job file to load parameters from e g c new_base job file xis LOAD EXISTING JOB FILE UNDERTAKE SHORT RUN ANALYSIS ADIUST NUMBER OF TAX OUTPUTS UPDATE FERTILITY PROBABILITIES Form 0 offers the user a series of alternative options for running LINDA Setting up a New Simulation The only exception is in the case when the user would like to stack a series of simulations for consecutive automated execution In this case the job file associated with each alternative simulation should be y ts my ts numbered in their order or execution e g job file1 xls job file2 xls job file3 xls 6 Page This function allows the user to define and run a new simulation from scratch Pressing the SET UP NEW SIMULATION button will lead to a series of alternative user forms which are designed to guide the user through the process of selecting new model parameters The related forms are described at length below Run Existing Job File An existing job specification as described by the parameters on the existing input sheet can be run by clicking the RUN EXISTING JOB FILE button The name of the simulation will be auto populated with whatever name exists in cell A2 of the current input sheet The user may alter this name t
24. NxT NxT NxT DIMENSION _ FILE csv NA NA NA NA NA NA NA age alc_dy bcohort ben cons costs cpl cp2 death_age dppart education emp1 2 eqs ful_ dy hum_cap isa isr_dy ihr_dy isa_cont labinc leis mdr na net nic nk DEFINITION number of families in simulated population cross section number of periods at which children can be born into households in simulation vector that reports precise ages at which children can be born into households minimum age of the simulated sample maximum age of the simulated sample number of periods that model projection covers number of user requested outputs from the tax and benefits routine age of reference adult years simulated alcohol duties per week birth cohort index higher number indicates younger cohort aggregate state welfare benefits received per week discretionary consumption per week non discretionary housing and childcare costs per week rights to first state contributory pension BSP proportion of full pension can be gt 1 for couples second state contributory pension S2P per week age at which reference adult dies years FLAG 0 1 if default is to opt out participate in pensions FLAG 0 1 for non graduates graduates NOTE this flag indicates highest qualification achieved during simulated lifetime students at entry to sample are not identified as graduates until they complete their studies employment
25. OUL o 10 i e A E A E AAE 31 Household level Microdata vissisvssaccarsonsssasscensdcodbnnnvnnnd vesnerseaseisnasadeesiennsioeunossenrsoocectebeounesebebeccesdeawnsass 32 High level summary SLAUISEICS siscssirsiirrscrirse eies dasr inini r renas AA ETA ENTERI Orao 33 Simulating General Equilibrium in a Closed Economy 0086 Error Bookmark not defined Decile level summary StAatiStiCS cccccccccccccccssseseceeceececsueeseeeeeceeeessseuseseeeceeeeesseaaasaseeeeeeeessasaeggess 35 Adjusting the Program Code ccccccccsssssssseeccececseeaessseescceccessseeessseeeeeceeeessaeeesseeeceeeeessesaaeseeeeeeeeessaauaagees 36 Basic COCO SEPUCEUN 5c cecrneessswverntecinaseranswoniun evenkbusanepeiiawiasticanhisossasisotassebanascecoavantanseiaatenmonnnmeniee 36 Programming ANALAYSIS ROUTINGS vasscsssniscsasdecsdsseondseensnesbasddneasavenessesaesaddeusansssnnndestnasyteoudepnaeneenatecnnes 39 Outline of the analysis solution 0 0 ccssessseeceeccceecsseessseeeceeceesseeasssececeeeeessaueasseeecceeessesaaaagassees 39 A practical programming example cccccccccccscessssseecceccecesuaesseeeeeceeceessuaasaseeeceeeeesseaaaaseeseeeeeeees 39 Introducing a NEW ANALYSIS FOUTING ccccccscssssssseceecccceesaseeseeeeceeeessseesesseeeceeeesssauaaaseseeeeeeeessaaaes 43 List Of global simulation Variables cccccccccssssssseceecceccecseeesseceeceeeesseeesasseeeceeeesseauaasseseeeeeeseeaaaees 44 Organisation of the Tax and Bene
26. THE NATIONAL INSTITUTE MODEL FOR LIFETIME INCOME DISTRIBUTIONAL The National Institute Lifetime INcome Distributional Analysis model LINDA User Manual 1 Table of Contents PAE OIC ELON OAT EEA A A N EEE A NE I AAN E E 2 Setting up the Model ecssssrairrnsioorirreiiri siara EAA Error Bookmark not defined Altering M del Paramete Srssscssicisriaininii inii E aN E E ANER 6 FORM 0 LINDA SIMULATION s ssresssrissrissesicrseviseviinnosirssirsaissr insistan ka renina NNE EENEN EEEREN OTE SINEAD ESNEA 6 FORM 1 KEY PARAMETERS eesssssssseeeressssssssecccrressssssescccnerssssssercecesesssssseseersssssesececeressssseeececrersssssese 8 FORM 2 ANALYSE EXISTING SIMULATION csscccccccesceeeesssesceececeessseeseseeesceceesseaaaaaseseeeeesseaueaes 10 FORM 3 FERTILITY ASSUMPTIONS iossesscoveisiesscecensnatesovsessenuehinebieas N EE 12 FORM A1 INCOME TAX AND NATIONAL INSTURANCE 2010 cccccccccceceeeeeeeceeseesseeseeseeeeeeeseees 13 FORM A2 TAX CREDITS WORKING LIFETIME ccccccccsssssssseeccceeeceseeesseeeceeceesseuaenseeseeeeesseaeaengees 14 FORM A3 HOUSING RELATED BENEFITS cssssscccccccecsseeesssecceeceesseeeseeeececeeesssuansseeeeesesseasanagees 15 FORM AA BENEFIT S scucessnesstnsrecsavoesdencennsvsauidavvniiomesaiwsscisaceasad wien uns soudosecotsaseussexcnndersnensiaat ARAO 16 FORM AS STATE PENSION AGE cs cccscssnsaesaenscnncasccaienestevndandcttatveanvencvasid cesta TE EENAA EAAS EAA 17 FORM
27. User defined tax output The model is set up to permit the user to define specific tax and benefits statistics that the model will generate for each simulated individual How these statistics are defined is discussed in Section 5 The number of statistics that the user has defined should be provided in the associated text box on this form Start year of simulation The model will project forward starting from data described for the year defined in this form 9 Page FORM 2 ANALYSE EXISTING SIMULATION FORM 2 USER DEFINED ANALYSIS ROUTINES enter the name of any analysis routines that are defined in the ANALYSIS 2 solution and which you would like to run during the current simulation analysis routine 1 analysis routine 2 analysis routine 3 analysis routine 4 analysis routine 5 analysis routine 6 Calculate suplementary income moments by age and year High level analysis of population cross sections year 1 year 2 year 3 year 4 year 5 year 6 High level analysis of individual birth cohorts birth year 1 birth year 2 birth year 3 birth year 4 birth year 5 birth year 6 year 7 year amp I tick if calculate statistics for equivalised income deciles a analyse population cross section yse pop cross section birth year 2011 analyse birth cohort tick if welfare comparisons defined as monetary equivalents compensating variations ENTER ENTER and RUN BACK
28. WP UK Start year of simulation 2006 Universal Credit number of additional outputs Ep a s 3 generated by tax function user defined tax structure Note that all financial terms are defined in prices for the tax function reference year Amovovment options Preference parameters part time fulHtime not employed relative risk aversion ty 1 gamma elasticity btw cons 0 22 C user defined employment options and leisure epsilon ma utility price of leisure 414 i alpha discount Factor 0 959 delta C fulltime not employed V impose minimum hourly wage rate s minimum age for tai short run discount aM adult rate Li factor beta development rate re under adult age adult rate 535 from adult age TIP Explanatory notes can be found by pressing the buttons Simulation Name 8 Page The user must provide an alpha numeric name for each simulated scenario The results of the simulation are stored in a sub directory with this name Preference Parameters The preference relation assumed for the model is described in Appendix A of this manual Key parameters governing the nature of the preference relation can be altered within this sheet Employment options Here the user can choose between alternative specifications for the simulated labour supply decision of each adult full time not employed full time part time not employed and an option that allows the user to
29. ach row represents a different family unit and each column a different time period The model will generate a series of summary statistics for each simulation by default which are reported in Excel files The model can also be directed to generate a range of additional summary Statistics see Section 4 and Form 2 in Section 3 for further details Step 3 think about likely incentive effects An important feature of the model is that savings and labour supply decisions are endogenous This means that these decisions react to the incentives that are embodied by the assumed policy environment Explaining the results that are reported by the model consequently depends in part on understanding the drivers underlying the simulated behaviour It is useful to think about what behaviour you expect to see before the model completes its analysis as this will help you to identify where to begin looking once the simulated results are in It is easiest to think about incentives relative to the base simulation as the model can be asked to generate comparisons with the base simulation by default Step 4 analyse model output This stage of the analysis involves comparing the model output against the expectations that you formed in Stage 3 described above It is not uncommon to find that behaviour deviates from what you had initially expected as the incentives embodied by policy can often be quite difficult to infer High level analysis The model produ
30. analysis of simulated output These routines can be edited through Microsoft Visual Studio 2010 at the time of writing and the steps involved in setting up this environment for use are provided in the second section of this manual Setting up the Model In this section we describe the basic programming structure outline how to create a new analysis routine and provide an overview of how the existing code is organised to calculate taxes and benefits Basic Code Structure e The Fortran code that is provided with the model is organised into four broad structures which can usefully be thought of as containers 36 Page The largest container is the solution which is a set of files that comprise the basic building blocks that Fortran uses to generate program files o The ANALYSIS solution can be opened by double clicking on the file analysis sIn in the FORTRAN ANALYSIS subdirectory The second largest container is the source file into which code is written o You can browse through the source files of a solution via the Source Files folder of the Solution Explorer which can be seen by selecting Solution Explorer from the View menu of Visual Studio o To add a new source file to a solution right click on the Source Files folder e select add new item e select Fortran Free form File f90 e makeup a name for the file toward the bottom e and press the Add button
31. between these two extremes and the option to adopt the same specification as the base simulation are also available Finally the user can direct the model to adjust capital and labour prices to reflect a General Equilibrium in a closed economy This option is discussed at further length in the following section 4 Simulation Output The model generates by default two levels of statistic for each simulation and saves these in the sub 7 directory simulations xxx where xxx refers to the name given to the specific simulation see discussion on form 1 above The model produces for each family in the reference population cross section simulated panel data for a range of characteristics over the life course These micro data are reported in a standard format csv and can be analysed by widely available statistical packages Secondly the model also generates a core set of summary statistics for each simulation which are reported in two excel files DA1 xls and hi_level_statistics xls Each of these respective model outputs is discussed separately below All three execution modes of the model are based upon linear interpolation methods solve using linearlised Euler conditions and omit non concavity checks The modes differ in the number of grid points that are assumed for liquid wealth labour income and pension state variables 31 Page Household level micro data The model stores the follo
32. bsequently use the specified simulation as its base for simulating a population forward through time Load Existing Job File It will sometimes be useful to load in parameters from an existing job file for analysis This can be achieved using the LOAD EXISTING JOB FILE BUTTON Undertake Short run Analysis The model will usually project the circumstances of a population forward through time from the base year assuming a single policy environment The UNDERTAKE SHORT RUN ANALYSIS button allows the population to be simulated forward assuming multiple policy environments We return to describe this option further under Form D1 below 7 Page Adjust Number of Tax Outputs The user can define a series of outputs relating to the tax and benefits structure that the model will save by default We describe how to define additional transfer statistics in Section 5 of this manual Where new outputs are desired then the model parameters can be adjusted to accommodate these by pressing the ADJUST NUMBER OF TAX OUTPUTS button Update Fertility Probabilities This is only necessary when the terms of fertility as assumed in the model are altered If this is the case then please contact the NIESR for further assistance FORM 1 KEY PARAMETERS FORM 1 KEY PARAMETERS Simulation Name Tax function to smmuste fom tax function reference year Te f 3006 Tax Benefit Model Tables DWP UK ahi C 2010 Tax Benefit Model Tables D
33. bserved see van de Ven and Lucchino 2013 for details The model comes packaged ready to project the circumstances of the population cross section forward and backward through time to build up a complete life history for each reference individual It is recommended that this be done and that the associated data should be defined as the base for subsequent simulations This can be done by following the steps 19 to 29 below 19 Open the MODEL subdirectory and then open job file xls 20 Ensure that you allow macros to work in Excel a please ask your system administrator if you require assistance with this If running a 32 bit environment then select Win32 here 4 Page 21 22 23 Press ALT F8 Select SIDD and press the RUN button Press the RUN EXISTING JOB FILE button This version of the model currently runs in around 9 hours the associated simulation creates a new set of base data for analysis using the full model specification 24 25 26 27 28 29 Re open job file xls Press ALT F8 Select SIDD and press the RUN button Enter age18_all into the text box with the title name of run to adopt as new base Enter base _2006_age18 all into the text box with the title directory name for new base Press the CONVERT RUN TO NEW BASE button Excel will then work away for a short while after which you should receive a message confirming that the new ba
34. ces a large number of high level summary Statistics by default in the file DA1 xls It can also be directed to report a series of age specific statistics for population cross sections and individual birth cohorts see Section 4 Through repeated use you are likely to settle upon some subset of these results as an appropriate place to start your analysis Detailed statistical analysis The model can be used to generate decile level statistics and to produce associated comparisons with the base population These statistics will often be sufficient to identify the key margins of behavioural variation simulated under a given policy environment and allow you to formulate a story underlying the results obtained 49 Page What to do when results do not conform to expectations If the above statistics do not enable you to devise a compelling account of the results generated by the model then it is often useful to focus upon the micro data generated by for individual family units Suppose for example that you cannot understand why labour supply falls under the policy environment of interest relative to the base simulation In this case you could look for units that are simulated to reduce their labour supply substantively under the new policy environment Bearing in mind that the model is designed so that the only differences between alternative simulations are due to the considered policy environments this approach will hopefully provide clues a
35. define an arbitrary number of labour supply alternatives When the third of these options is chosen then the model assumes that the same hourly wage rate applies to all labour alternatives If the full time part time option is chosen then hourly wage rates may vary between by the labour decision National Minimum Wage Tick this box to apply the NWM and set the adult level for the year from which the model projects a population cross section through time The model applies the NMW by assuming that any individual who s underlying productivity implies a lower hourly wage rate at a given employment option e g full time part time than the National Minimum cannot find work at that employment option Tax function to simulate from LINDA is currently coded to simulate the population cross section s lifetime under three alternative assumptions concerning the prevailing tax system The model includes the policy environments described by the 2006 and 2010 DWP Tax and Benefit Tables and the tax and benefit system that is expected to be in place following introduction of the Universal Credit Users should use the radio buttons in Form 1 to select the tax system that they wish to apply Specific parameters characterising these systems are specified in later forms It is also possible to direct the model to use an alternative tax schedule that they have written themselves Details about how to specify an entire tax schedule are discussed in Section 5
36. duced by default This involves the following steps 1 Define the number of additional statistics in the model parameters a Add the number of additional tax statistics that you would like to generate with the model to the number currently defined in cell AO14 of sheets input and inputA in job file xls 46 Page i E g if the pre existing value in cell AO14 is 17 and you would like to add an additional three outputs then alter this cell to 20 b Save job file xls 2 Alter the Fortran code in the solution TAXES sIn to generate the statistics of interest a Note that these statistics need to be included as output variables in the subroutines that calculate taxes and benefits e g you might alter the subroutine call UK_1 age time n_taxp4 tax_par4 ndim_tax tax_par yy1 Rpstt ptbmr mcost_cpc1 mcost_cpc2 costs benefit_s tax_s 1 8 so that it includes an additional output xx by including xx at the end of the variable list as in call UK_1 age time n_taxp4 tax_par4 ndim_tax tax_par yy1 Rpstt ptbmr mcost_cpc1 mcost_cpc2 costs benefit_s tax_s 1 8 xx 3 Alter the output vector to return the statistics to the model a The additional statistics need to be sent to the subroutine pack_taxoutputs and then added to the end of the output vector as directed in that subroutine e g in the above example we would alter the code as indicated here call pack_taxoutputs taxoutput n_taxo
37. e Active Solution Platform select x64 and press the Close button 17 Under the Build drop down menu select Rebuild Solution You should then see some text like 1 gt Rebuild All started Project TAXES Configuration complete x64 1 gt Deleting intermediate files and output files for project TAXES configuration Complete_taxes x64 1 gt Compiling with Intel R Visual Fortran Compiler XE 13 0 1 119 Intel R 64 1 gt 2_global F90 1 gt UK_1 F90 1 gt IE_1 F90 1 gt AUS_1 90 1 gt UK_2 F9 1 gt 3_NewTemplate f90 1 gt 1_TaxTools f90 1 gt 0_app_taxes f90 1 gt Linking 1 gt Creating library C temp MODEL TAXES 1ib and object C temp MODEL TAXES exp 1 gt 1 gt Build log written to file C temp FORTRAN TAXES x64 Complete taxes BuildLog htm 1 gt TAXES error s warning s Rebuild All 1 succeeded failed skipped 18 Redo steps 2 to 17 for the ANALYSIS program solution The above ensures that the programming files are all present and work Creating a simulation base As noted in the introduction the model starts with data reported by the Wealth and Assets Survey for a population cross section of reference adults The model parameters have been calibrated to match the model to a wide range of summary Statistics calculated from survey data sources with the calibration structured around the year in which the reference population was o
38. e age then they will make the same decisions regardless of their current age With 0 lt lt 1 intertemporal preferences exhibit myopia which means that people would like to be more patient in the future than will actually be the case The model assumes that people are sophisticatedly myopic in the sense that they are aware of their own self control problems and react to them This can result for example in a preference to lock savings away in a pension rather than a bank account to avoid the temptation of spending the savings prematurely y is relative risk aversion and is the probability of surviving j years given survival to age t and G represent the warm glow utility derived from leaving a positive bequest w t1 1 Z l y a P 1 y l 7 i t j t i j E 1 1 7 Uu BE Y bu h EE E E 2 i t j t 1 i j 51 Page
39. e files folder i O entry f90 ii 1 GlobalParam f90 iii 1b simdata f90 iv 2_sorting f90 v DeveloperRoutines f90 vi UserAnalysisRoutines f90 3 Double click on the file DeveloperRoutines f90 a This should open a text file in the main window of Visual Studio 4 Press CNTRL HOME a This should move the cursor to the top of the text file if it wasn t already 5 Toward the top of the text window you should see a grey bar that is split into two parts Click on the right part which should have DA1 listed in it 6 Select DA1 from the drop down menu a This will move the cursor to the beginning of the SUBROUTINE DA1 Re build the Solution in a Debug Configuration 1 Select the appropriate compile settings a Inthe solution explorer highlight the purple icon ANALYSIS Under the view menu of VS select Property Pages From the Property Pages window press the Configuration Manager button Under Active solution configuration select debug Under Active solution platform selection x64 mano 40 Page Press the Close button g Press the OK button e You can also do the above more easily by selecting the Active solution configuration and Active solution platform from the drop down windows of VS which may be visible as toolbars in the VS environment 2 Build the solution a From the Build menu of VS select Clean Solutio
40. easier to alter model parameters directly through the cells on the input sheet of job file xls The second is to alter the tax code directly see Section 5 for details Having adjusted the model parameters it is often advisable to check that the revised structure conforms to that which is desired A number of tools are provided with the model to facilitate such checks Checking differences with base simulation The check tab in job file xls allows you to identify which parameters in the input sheet are different to those of the base simulation stored in the inputA sheet You can run this check after working through the front end forms in job file xls in one of two ways If you press the LAUNCH MODEL button on Form Z then you can look at the check tab after the fortran program has started Alternatively you can choose the EXIT button on Form Z saving job file xls and then look at the check tab In this second case after you have confirmed that you are happy with the differences described between the prevailing model parameters sheet input and the model base sheet inputA you can launch the Fortran code manually by double clicking on the program SIDD exe Validating the tax function As noted in Section 3 Form D4 there are two routines that are provided with the model that produce trial statistics for the simulated tax function The terms of both test routi
41. eek reduced rate VAT paid per week liquid wealth of household aggregate household net worth including value of pension rights flag 1 if reference adult receives wage offer 0 otherwise wage _offer2 flag 1 if spouse receives wage offer O otherwise 45 Page Organisation of the Tax and Benefits Code A stylised schematic of how the tax and benefit calculations are organised is provided in Figure 3 i 5 initialise_taxinputs unpacks the variables transferred from LINDA in the vector tax_vars inputs outputs taxinput into individual variables that are useful for analvsis UK_1 inputs outputs initialise_taxpars global_tax calculates all outputs for the UK unpacks the variables transferred from LINDA in the matrix tax_par into individual variables that are useful for analysis global variables CalcTax calculates income tax InflationAdj_taxpars UK_params1 adjusts all tax and benefit global variables UK IncomeSupport parameters to allow for assumed temporal indexing calculates means tested benefits TaxCredits global variable access calculates tax credits HousingBenefits calculates Housing and Council Tax benefits return to LINDA FIGURE 1 Stylised Schematic of the Calculation of Taxes and Benefits in LINDA Adjusting number of tax outputs It is possible to alter the tax code of the model so that it will generate additional summary statistics to those that are pro
42. ernative analytical approaches that are referred to above Thus a thorough basis for balanced policy advice is best achieved at the present time by considering the same issue from alternative analytical perspectives LINDA is comprised of a series of Excel files that describe model parameters and a central executable program that undertakes all of the requested analyses Alteration of the model parameters is facilitated through an Excel front end via a series of user forms One purpose of this manual is to describe how to use this Excel front end But before we move on to that it is worth describing at a very high level of detail how the model works The model starts from cross sectional data for the nuclear families of a sample of reference adults drawn from the Wealth and Assets Survey The user is first directed to run a simulation that projects the evolving circumstances for the population cross section forward and back through time to build up a complete life history for each reference adult These lifetime data are saved by the model and used as the base data from which subsequent policy specific projections are made It is possible to update the base data used by the model at any time as is described later in this manual A simulation for a given policy environment typically involves 3 stages 1 Specify model parameters through an Excel spread sheet 2 Run the executable program which automatically loads the model
43. fits Code cccccccssssssssesceeceeceesseeseseesceeeesseeeaaaseeeceeessseauansgseees 46 Appendix A The Utility FUNCTION sisscisa2scaswsduaveiodosnoondeutodenernesnsnobneredesseansneiad sontaateaeanigiarade deinwdeduinatidertedes 48 1 Introduction This manual describes use of the National Institute s Lifetime Ncome Distributional Analysis model LINDA which is designed to explore the effects of changes to the tax and benefits structure on household circumstances through time The model generates panel data for the entire life course of a reference population cross section and a series of summary statistics for each considered policy environment LINDA is complementary to other analytical approaches that are currently in use Current large scale microsimulation models are able to provide detailed information regarding the immediate financial implications of policy change However such models are not well adapted to consider how savings employment and consumption can be expected to adapt to altered financial incentives Econometric analyses can go some way to filling in this missing detail but not where uncertainty is likely to influence decision making LINDA is specifically designed to explore savings and employment responses to policy change in context of important aspects of uncertainty that individuals face The cost of this approach is that it is unable to reflect the degree of detail that is commonly taken into account by the two alt
44. h from state pension age 1 5 1 5 contributions recetved in respect of M involuntary unemployment iw contributions received in respect of child care ENTER and RUN 84 25 E p w 134 75 E paw oF j pW FORM C1 STATE CONTRIBUTORY PENSIONS FORM Ci STATE CONTRIBUTORY PENSIONS Contributory Pension 2 value of pension depends on years of contributions and income modelled on State Second Pension tick if included in simulations tick if simulated endogenously A lower earnings limit Beo E p w lower earnings 40 threshold upper accrual point gas accrual rate 1 accrual rate 2 benefit growth pre j A fa state pension age benefit growth from o o state pension age iE amend terms of Contributory Pension 2 to conform to private pensions 3 Note all growth rates are real inflation adjusted Form C1 allows two forms of State contributory pension to be included in the analysis Contributory Pension 1 offers a flat rate increase in the pension payable from state pension age for each year that contributions are accredited during the working lifetime and is designed to reflect the basic State Pension Contributory Pension 2 provides pension benefits from state pension age that can increase with earnings during the working lifetime and is designed to reflect the State Second Pension 21 Page FORM C2 NON PENSION WEALTH FORM C2 NON PENSION WEALTH tick if investment
45. h inheritance received value of inheritance wealth held in Individual Savings Accounts ISAs contributions to ISAs per week insurance standard rate duty paid per week labour income of household per week proportion of time spent in leisure marginal deduction tax rate number of adults in household 1 singles 2 couples household net disposable income per week excluding returns to housing National Insurance Contributions of household per week aggregate number of dependent children number of children in birth age X own business wealth NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE participation tax rates of reference person spouse private pension PP OP income received per week private pension contributions p w aggregate contributions to private pension including employer contribution p w contribution rate to private pension aggregate accrued rights to private pension defined as an annuity stream p w aggregate accrued rights to private pension defined as a wealth equivalent age at which pension income first received pre tax and benefit household income per week whether household defined as retired for pension purposes 32 Page ri proportion of wealth invested in risky assets risky_r return to risky assets semp self employment flag 1 implies self employed if working sim_weight household weighting variable student student statu
46. in the immediately succeeding year unless they experience a job change A job change has no influence on the family s circumstances other than to indicate that the pension to which they are eligible is taken as a new random draw in the same way as it would if they chose not to participate in the preceding year The form further includes tick boxes to impose opting in as the default decision on selected pension schemes if the decision to participate is endogenous and whether decision costs are incurred when deciding against the default option 24 Page FORM C5 PRIVATE PENSIONS cont FORM C5 PRIVATE PENSIONS cont State Sponsored Incentives to Save in Private Pensions Superannuation concessionary contributions Non concessionary contributions tax rate on g g tax rate on a w contributions contributions contributions cap 215000 to age 65 contributions cap 1000000 to age i Te contributions cap 715000 to age 0 contributions cap 3000000 to age 7 contributions cap 715000 all higher ages contributions cap iooo000 allhigher ages minimum maximum e z Pigs of 20 Yo 100 Ho can make contributions after pension take up relie Pensions Dispersals maximum age ofaccess s 75 pension take up requies nen enooyment proportion of in frst period in al periods annuity taxable of recept of receipt age regime 1 100 toage 998 k age regime 2 100 to age 999 age regime 3 100 all highe
47. ion Age if no can ignore following parameters back in time base year age 60 cs from year 1925 194 State Pension Age base year back in time age 88 E 65 65 65 66 from year 1925 1 1950 10 2020 ENTER and RUN RESET BACK Incapacity Benefit Age This is the lowest age at which incapacity benefit is assumed to be available as a form of early retirement support This age can be allowed to vary through time as indicated by the auto populated figures Pension Credit Qualifying Age This is the lowest age at which the Pension Credit is assumed to be available The model allows the qualifying age for Pension Credit to differ from State Pension Age consistent with current legislation The Pension Credit Qualifying Age can be allowed to vary through time and any disparity with State Pension Age can be suppressed from an exogenously specified year State Pension Age This is the age from which state pensions are taken Any employment income after State Pension Age is not subject to NICs and all individuals are assumed to be eligible to the Pension Credit from State Pension Age under the pre programmed tax structures 17 Page FORM A6 SUPLEMENTARY BENEFIT LIMITS FORM AS SUPLEMENTARY BENEFIT UMTS stg emg SS Working Aged Benefits Chidcare element Income support Housing beneft Counci tax beneft Tax credits of tax credit Universal Credit miewels fo ilo fo Wae Wa em min relative value 0 1
48. isting simulation 1 Create a new subroutine with a name of your own choosing a We have included an example template_eg in file UserAnalysisRoutines f90 for you to work from 2 Include the name of your new subroutine in the list of the UserEntry subroutine 3 Save and Build your new analysis routine a From the Build menu of VS select Build Solution 4 Tell the model to run your new routine a Open job file xls b run the macro SIDD Alt F8 select SIDD and run c Type the name of your existing simulation into the text box under the title NAME OF EXISTING RUN TO ANALYSE i if itis anew simulation then work through the macro as usual until you get to Form 2 d Press the ANALYSIS OF EXISTING SIMULATION button e Type the name of your new analysis routine into the text box alongside the title Analysis routine 1 f Press the ENTER AND RUN button 43 Page List of global simulation variables VARIABLE pop_numb N brth_ages K brth_agesi min_age max_age SamplePeriodAll T n_userto U age alc_dy bcohort benefit cons costs cp1 cp2 death_age default_pp education emp1 2 eqs ful_ dy hum_cap isa isr_dy ihr_dy isa_cont lab_inc leis mdr na net_income nic nk scalar scalar scalar scalar scalar scalar NxT NxT N NxT NxT NxT NxT NxT N NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT
49. lows for multiple births at each child birth age The parameters in this form allow the number and timing of child birth ages to be defined the number of children that can be born at each age and the number of years that children are considered to remain dependents It is also possible to suppress explicit consideration of children through this user form which will allow the model to complete a simulation in appreciably less time 12 Page FORM A1 INCOME TAX AND NATIONAL INSTURANCE 2010 Tax thresholds 2nd tax threshold 3rd tax threshold 4th tax threshold 5th tax threshold 6th tax threshold 1000010 Workng Sfetine personal allowance wdrwl threshold PA wdrwl rate 50 p a 1000000 p a p a 1000020 p a 6475 000000001 P a 99999 9999999 p a FORM A1 INCOME TAX AND NATIONAL INSURANCE 2010 Tax rates rate 1 2 a 0 St i ira so 50 hr e 4 50 Pee ie Personal Allowances rate 2 rate 3 rate 4 rate 5 rate 6 From state pension age personal allowance 1 lower threshold 1 upper 29080 threshold 9565 000000001 P a 22900 p a p a Income Tax Rates and Thresholds NIC rates amp UEL LEL Personal Alowance 11 rate 2 i p w rate i primary threshold 110 844 p w upper earnings limit 2 lower threshold wdrwl rate2 99999 99999
50. mainder of this sheet if self employed are not included F allow contributions to own business assets contribution rate to io a 4 own business wealth rate of return 45 Sf p a expected at ee tay eat 23 Fa p a tick if returns are uncertain Capital gains taxes fan avn business wealth tax free threshold agon p a capital gains tax basic AQ rate entrepreneurs relief 10 i rate entrepreneurs relief 10000000 EPa gt rate cap allow contributions by the self employed to private pensions contribution rate to 5 Yo private pensions ENTER and RUN RESEF BACK This form allows the user to indicate whether the self employed should be included in the analysis If the self employed are included then the user can also define whether the model should account for own business assets and private pension contributions 27 Page FROM C8 GRADUATE STUDENTS ON ENTRY TO SAMPLE FORM C8 GRADUATE STUDENTS ON ENTRY TO SIMULATION IW take student status into account at entry to simulated population 7 if not then the remainder of this sheet can be ignored proportion type 1 0 72 age of completion 33 students student type 1 failure rate 0 14 age of completion 7 student type 2 For the greater part of the simulated lifetime the qualifications of each reference adult remain time invariant The sole exception occurs toward the beginning of the simulated lifetime when the model
51. me tO of household ii nk_all ii t0 2 own business wealth contributions to personal pension 1 per week aggregate accrued wealth in personal pension 1 pre pension take up personal pension income post pension take up per week participation tax rates of reference person spouse pension income received per week personal pension to which individual is eligible aggregate contributions to personal pension 2 per week aggregate accrued rights to private pension defined as an annuity stream per week aggregate accrued rights to private pension defined as a wealth equivalent age at which pension taken up years pre tax and benefit household income per week private pension contributions per week proportion of wealth invested in risky assets self employment flag 1 self employed if supply labour O employee if supply labour household weighting variable index based on weighting variable reported in WAS student status 0 non student 1 student graduating at age 23 2 student graduating at age 27 household tax burden by tax band per week aggregate household tax burden per week tobacco duties paid per week retirement status O not yet defined as retired 1 retired user_taxoutput user defined output from tax routines user defined Val vat_sr vat_rr Ww w2 wage_ offer measure of expected lifetime utility utility index standard rate VAT paid per w
52. n b From the Build menu of VS select Build Solution e You should see the following output 1 gt Rebuild All started Project ANALYSIS Configuration debug x64 1 gt Deleting intermediate files and output files for project ANALYSIS configuration debug x64 1 gt Compiling with Intel R Visual Fortran Compiler XE 14 0 1 139 Intel R 64 1 gt 2_sorting f90 1 gt 1b_simdata f90 1 gt 1_GlobalParam f90 1 gt UserAnalysisRoutines 90 1 gt C MyFiles MODEL_LAB FORTRAN ANALYSIS UserAnalysisRoutines f90 68 remark 7712 This variable has not been used II 1 gt C MyFiles MODEL_LAB FORTRAN ANALYSIS UserAnalysisRoutines f90 69 remark 7712 This variable has not been used TEST 1 gt DeveloperRoutines f90 1 gt 0_entry f90 1 gt Compiling manifest to resources 1 gt Microsoft R Windows R Resource Compiler Version 6 1 7600 16385 1 gt Copyright C Microsoft Corporation All rights reserved 1 gt Linking 1 gt Creating library C MyFiles MODEL_LAB MODEL ANALYSIS lib and object C MyFiles MODEL_LAB MODEL ANALYSIS exp 1 gt Embedding manifest 1 gt 1 gt Build log written to file C MyFiles MODEL_LAB FORTRAN ANALYSIS x64 debug BuildLog htm 1 gt ANALYSIS error s warning s Rebuild All 1 succeeded failed skipped c Check that the files have built to the correct location e Look in the model subdirectory and check that 8 new files have been
53. n rate 9 employer contribution Per TES e J mooo rate annual management E pe i Me mi he 4 costs of capital opt out of contrib pens p a default to opt in E M m m proportion of penson 25 rate of return T std dev of tt amp tick if returns taken as lump sum expected a p a return Wo p a uncertain ENTER and RUN BACK RESET Form C3 allows the parameters of personal pension schemes available in the model to be set It is necessary to ensure that the check box tick if any private pension available is set to allow for private pensions in the model simulations If private pensions are accommodated in the simulations then it is possible to allow for endogenous decisions regarding pension take up participation endogenous and contribution rates It is also possible to allow for multiple private pension types in the simulation which differ from one another over a range of details including minimum employee and fixed employer contribution rates and management investment charges that reduce total annual returns Pension contributions are specified as a percentage of labour income and only if labour income exceeds the lower threshold defined in this form Parameters defining the rate of return to private pensions and whether these returns are uncertain can also be specified If uncertain returns are considered the box should be ticked and the standard deviations of the rate
54. nes are defined by Excel files stored in the base_files analysis_files subdirectory tax_test xls allows you to generate test statistics for a range of alternative pre tax incomes for a given family type tax_test2 xls is similar to tax_test xls but allows you to vary both pre tax income and family demographic characteristics These test routines can be run at any time after you have started running a given simulation 1 Open the relevant excel file tax_test xls or tax_test2 xls 2 Define the alternative test cases that you would like to consider 3 Save the excel file 4 Open job file xls 48 Page 5 Runthe SIDD macro 6 Enter the relevant simulation name in the text box adjacent to the button ANALYSE TAX FUNCTION 7 Press the ANALYSE TAX FUNCTION button 8 Select the relevant analysis routine using the radial button 9 Press the ENTER and RUN button A new simulation window will open and will indicate when the analysis routine is complete You can then re open the relevant excel file tax_test xls or tax_test2 xls to check the results obtained Step 2 run model and generate output As noted in Section 4 two types of output can be generated by the model The model will solve simulated panel data for each family unit in the form of csv files that can be opened by most Statistical packages In this case each variable is saved in a separate file e
55. nt to the simplified tax structure are displayed 14 Page FORM A3 HOUSING RELATED BENEFITS FORM A3 HOUSING RELATED BENEFITS a Counci tax Counci tax Eligible rent single adults couples 1 bedroom 4828 pw 134 Ep w 179 E p w ees poses without children 2 bedroom 53 92 pw 147 Epw 195 E pw EE families 3 bedroom 5979 Ep w 165 pw EE Ep w assumed for families with 2 children Allowances Prema personal 57 45 E p w family 16 25 E paw allowance lone parent 534 E p w single pensioner 56 6 E pw allowance couples 90 1 E p w pensioner couple 83 05 E pow allowance children 45 58 pw single incapacity 78 5 Epo alowance benefit recipient couple incapacity 125 45 E pw benefit recient Famings disregards single adult 5 E pw HB taper 65 w l rate i lone parent 35 E p w HB minimum 0 5 p w payment couple 0 E pw CTB taper 39 2 rate additional 14 pew CTB min 0 01 E pw payment ENTER and RUN RESET BACK Form A3 defines the housing costs and related benefits assumed by the model Rental costs are based upon the number of children in a household and Council Tax varies by household relationship status Matching to survey data suggests that these housing costs should be based on TBMT assumptions for local authority tenants and not private tenants as had been assumed in the past This seems a more sensible assumption for those t
56. o an alpha numeric combination of their choosing The model will then run and save all associated results into a subdirectory with the name given to the simulation Analysing the Tax Function It is often useful to eyeball the influence of simulated taxes and benefits on households The model includes two analysis routines for this purpose which can be accessed by pressing the ANALYSE TAX FUNCTION button The associated analysis routines are described under Form D4 later in this manual Analyse Existing Simulation The model permits a series of supplementary analyses to be run after a given simulation is complete Pressing the ANALYSE EXISTING SIMULATION button will open a new form that allows the user to choose which additional analyses are performed This alternative is returned to under Form 2 below Convert Run to New Base As discussed in the introduction the model projects a population through time assuming a series of base parameters The base from which model projections are made can be re specified to reflect any simulation that the user has previously run by listing the simulation name in the NAME OF EXISING RUN TO ADOPT AS BASE text box and pressing the CONVERT RUN TO NEW BASE button A name for the new base must also be entered and all associated files will subsequently be stored under the given name in the subdirectory base_ files of the main model directory The model will su
57. oward the bottom of the distribution The Allowances Premia Earnings Disregards and taper rates assumed for Housing Benefit and Council Tax Benefit can all be varied here 15 Page FORM A4 BENEFITS r x FORM A4 BENEFITS o o na Jobseekers Allowance Benefit Value Benefit Value Assets test jobseeker allowance 57 45 p w jobseeker allowance 90 1 p w exemption singles 6000 personal couple jobseeker allowance 57 45 p w free school meals 4 38 p w exemption couples 6000 lone parent rate of imputed rent 1 5 Incapacity Benefit early retirement Benefit Vale Assets test Assets test incapacity benefit 78 5 p w exemption singles 6000 rate of imputed rent 1 5 personal incapacity benefit 125 45 p w exemption couples 6000 couple Pension Credit n Benefit Value Benefit Value Assets test guarantee credit 114 05 p w savings credit w exemption singles 6000 threshold singles singles guarantee credit 174 05 p w savings credit w exemption couples 6000 threshld couples couples z guarantee credit 100 savings credit rate of imputed rent 1 5 withdrawal rate withdrawal rate Flat rate Benefits child benefit 17 45 p w flatrate state eldest child pension single child benefit other 11 7 Ep w flat rate state children pension couple ENTER and RUN RESET BACK
58. ows based on the above example o SUBROUTINE AA1 x y This line denotes the start of the subroutine and the variables that are used as inputs and outputs if the subroutine takes in no explicit inputs and produces no explicit outputs then we write SUBROUTINE AA1 o USE BB This line gives SUBROUTINE AA1 access to the SUBROUTINEs contained in MODULE BB 37 Page O This line is only required if you want to access SUBROUTINES or global variables stored in MODULE BB IMPLICIT NONE This line is necessary to avoid easy programming errors do a google search on it for further detail real 8 x y This line of code refers to the type definitions and usually covers a number of lines A type definition tells fortran the explicit nature of the data that each variable contains The variables that you will most commonly require will be limited to real 8 a number with a decimal point and integer 4 a whole number without any decimals types e Avariable cc is assigned a real type by real 8 cc e Avariable cc is assigned an integer type by integer 4 cc e f ccis a matrix of real numbers with dimension 5 4 5 rows and 4 columns then it is assigned by real 8 cc 5 4 You must assign types to all of the variables that are included as inputs and outputs to a given subroutine e g x and y in the example here You must also assign types to all of the variables that you use within the
59. r L in the form of a CES function 1 Y AlaK 1 a p Jae Assuming that factor markets are perfectly competitive implies that capital and labour are paid their respective marginal products so that the interest rate r and wage rate w are given by l r d as AaK ak 1 a EZ OK l w Alla aK 1a ae OL where ois the rate of depreciation of capital The aggregate capital stock is set equal to aggregate household wealth less government debt where age specific averages generated by the model are weighted to match household numbers by age described by 2001 census data Similarly aggregate labour supply is set equal to the aggregate wage bill and these two capital and labour are combined to give aggregate production as described by the CES function referred to above Investment is g K where g is the assumed growth of the economy Government consumption G is then calculated to equate aggregate income to expenditure G Y C I where C is aggregate household consumption It should be noted that we do not consider the issue of the government budget balance because we do not cover all of the forms of taxation that are applied in practice for example LINDA currently omits taxation of firms When directed to generate results for the General Equilibrium in a closed economy the model iteratively adjusts interest rates r and wage rates w until these are consistent with the associated aggregate
60. r ages 5 ENTER ENTER and RUN BACK RESET This form sets the tax treatment of pension contributions and dispersals Concessionary contributions refer to pension contributions that receive some tax relief in contrast to Non concenssionary contributions Caps on contributions can be administed within three mutually exclusive age bands and the tax relief given to concenssionary contributions can also be subject to limits The bottom panel of this form also allows the terms of pension dispersals to be defined 25 Page FORM C6 ESCALATION FORM C6 ESCALATION thresholds 1 5 p a pension contribn 1 5 0 p a thresholds benefits 1 5 p a value of guarantee 1 7 opa credit child care costs 1 5 8 p a maximum value of g 26 p a savings credit housing costs 1 5 p a national minimum g Yo p a wage rate ENTER ENTER and RUN RESET BACK Here annual growth rates can be defined for tax thresholds benefit rates child care costs housing costs and the thresholds used for determining income eligibility of pension contributions It should be noted that there is trend growth of wage incomes of 2 5 p a assumed in the model When the form is complete the ENTER button is pressed The RESET button restores the initial values of all of the parameters 26 Page FORM C7 SELF EMPLOYMENT FORM C7 SELF EMPLOYMENT i tick if self employment included in the simulated population note can ignore the re
61. rest should be provided The model can also be directed to report differences with the assumed base simulation In this case welfare comparisons between simulations can be specified either in the form of percentage changes or monetary equivalents The second of these two is given the technical term compensating variation and the associated box should be ticked in this user form if this is the format that welfare effects should be expressed in 11 Page FORM 3 FERTILITY ASSUMPTIONS FORM 3 FERTILTY ASSUMPTIONS explicitly model number and age of dependent children in each household if not then can ignore all other parameters defined in this form number of child 3 i E age at which birth ages child matures parent age Max na at bith of births child birth age 1 chid birth age ii iil child birth age 2 nN r child birth age 12 chid birth age3 P child birth age 13 ia child bith age 4 Ph child birth age 14 chid birth age S f o chid birth age 15 child bith age 6 p child birth age 16 child birth age 7 i child birth age 17 E chid brth age 8 3s child birth age 18 child birth age 9 i 7 child birth age 19 chid bith age 10 4 T child birth age 20 To ensure that the model will solve within the desired timeframe it is currently necessary to restrict child births to a small set of child birth ages e g 3 To offset this stylisation the model al
62. rs of family units ranked in ascending order by equivalised net lifetime income On the right we have the seven lowest values of ny_eq simulated by the model Re build the Solution in a Release Configuration 1 Select the appropriate compile settings d e f g h i j In the solution explorer highlight the purple icon ANALYSIS Under the view menu of VS select Property Pages From the Property Pages window press the Configuration Manager button Under Active solution configuration select release Under Active solution platform selection x64 Press the Close button Press the OK button e You can also do the above more easily by selecting the Active solution configuration and Active solution platform from the drop down windows of VS which may be visible as toolbars in the VS environment 2 Build the solution k From the Build menu of VS select Clean Solution From the Build menu of VS select Build Solution 42 Page SSS 82 ANALYSIS Debugging Microsoft Visual St File Edit View Project Build Debug Team Data Tools Test Window Help _ t lS id RK Gae 5S f Gl gt debug 64 2B deciles based on lifetime incom 23 Gh 29 Se Bl Sok aca See CE AnA SSG aaa a Process 9076 SIDD EXE Thread 9104 Main Thread WW Stack Frame ANALYSIS dilDEVELOPERAN
63. s taxX household tax burden paid in tax band X per week taxagg aggregate household tax burden per week tbc_dy tobacco duty paid per week train_decis NOT APPLICABLE training NOT APPLICABLE traintime NOT APPLICABLE user_tox user defined output X from tax routines Val measure of expected lifetime utility vat_rr reduced rate VAT paid per week vat_sr standard rate VAT paid per week w liquid wealth of household w2 aggregate household net worth wage_offer flag 1 if reference adult receives wage offer 0 if they do not wage_offer2 flag 1 if spouse receives wage offer 0 if they do not The following relationships exist between simulated variables W1 W net hsgret cons costs isa_cont sum indirect taxes 1 net prett ben taxagg nic ppc 2 investment income prett labinc peninc hsgret 3 Note only realised housing returns are included in the reported measure of disposable income Note whereas equation 2 holds throughout the simulated lifetime 1 is subject to variation in respect of relationship transitions liquidity constraints and about the age of pensions take up Default summary statistics High level summary statistics hi_level_statistics xls The high level statistics that are reported by the model fall into two broad categories which are each represented by a separate table Simulated population averages for
64. s generated for output capital and labour supply Note however there is no guarantee that the model will converge The analyst is given a warning if the model has failed to find a solution after searching over 25 alternative parameter combinations and can choose to continue with the analysis or cancel out in that case A broad selection of summary statistics DA1 xls The spreadsheet DA1 xls that is generated by default for each simulation reports a series of summary statistics that have been identified as useful by policy makers A wide range of statistics are reported and the excel file is designed to be fairly self explanatory The code that is used to calculate the statistics reported in DA1 xls is provided in the ANALYSIS solution that is provided with the model see Section 5 for details Please contact the NIESR if in doubt concerning definition of the statistics reported in the excel file 34 Page Optional summary Statistics High level analysis of population cross sections and birth cohorts The model can be directed to report age specific summary statistics for selected population cross sections and birth cohorts Where the model generates statistics for a cross section then it will save results into a file named NNN YYYYcs xls where NNN is replaced by the simulation name and YYYY by the year of the relevant cross section Similarly birth year statistics are saved into a file named NNN YYYYby xls This analysi
65. s of return set 23 Page FORM C4 VARIATION OVER PRIVATE PENSION ELIGIBILITY FORM C4 VARIATION OVER PRIVATE PENSION ELIGIBILITY Private Pension Variation from One Year to the Next Income Regune I Income Aegine 2 Income Regine 3 upper income Co 30000 all incomes in DEN I le 650 i n a 3 l D W threshold excess of regime 2 job change default opted in fo private penson Probably of pension scheme elgbalty given job change private pension 1 46 100 Private pension 2 Private pension 3 Private pension 4 Private pension 3 model decision costs in relation to pensions I ENTER ENTER and RUN BACK RESET Households are considered to be eligible to participate in only one of the above defined private pension scheme in any one year Eligibility to each scheme is identified stochastically with reference to income dependent probabilities defined in Form C3 The likelihood that a family is eligible to a given pension scheme in each year depends upon whether they chose to participate contribute to their eligible pension in the preceding year and their income Individuals who chose not to participate in a given scheme receive a new random draw from the available pensions in the immediately succeeding year In this case the probability of drawing a scheme varies over three alternative income regimes Individuals who chose to participate in a given scheme are automatically assumed to be eligible to the same scheme
66. s routine delivers age and relationship specific moments for labour supply employment income disposable income consumption private pension participation and wealth each in a separate worksheet Statistics are reported in both tabular and graphical form Decile level summary statistics for population cross sections and birth cohorts A workbook analysis_dec xls is generated by the programme and is placed in the sub directory given by the model name Users are likely to be interested in both the absolute values and the differences from the base The differences are generated in differences dec xls Users have two options with regard to the way in which decile groups are defined they can choose to define deciles on characteristics associated with a prevailing simulation or they can choose to maintain the population groups defined by the base simulation When the latter of these two options is selected then the letter b is appended to the end of the associated output file names The default for the model is to group households on the basis of simulation specific characteristics To apply population subgroups defined by the base simulation the analyst should enter the value 1 into Cell Y58 of the input sheet on the associated job file Distributional measures depend on the variable used to rank households The output files associated with the decile analysis each include two work sheets sim _output_all ranks individuals by
67. s to the incentives that underlie the unanticipated behavioural responses As a last resort staff and the NIESR will attempt to provide technical support subject to availability Step 5 package output Having identified a behavioural story underlying simulated results the packaging exercise is usually fairly straight forward As this exercise will vary depending upon the subject of concern we do not discuss it further here 50 Page Appendix A The Utility Function This has two components to it Within period utility u is a function of total household consumption c adjusted for effective household size 6 and leisure time represented by a represents the consumption equivalent of leisure and the elasticity of substitution between consumption and leisure 1 1 1 e e 1 1 8 t Hu C ip S a tal o Ile i j i j 1 Within period utility enters into an intertemporal utility function in the manner represented below Intertemporal discounting takes a quasi hyperbolic form where is the long run discount factor and is the excess short run discount factor When 1 preferences are time consistent which implies that for any given set of circumstances the same decisions will maximise expected lifetime utility regardless of when the decisions are made That is if an individual could commit to savings and employment decisions that take their evolving circumstances into account for any futur
68. se has been created If you look in the base_files subdirectory you should now see a new subdirectory with the name base 2006 _age18 all which includes all of the files defining the base simulation specification To test that the model set up has been successfully completed 30 31 32 33 34 35 36 37 38 39 Re open job file xls a This file has been changed since step 24 so that it now references the new base model directory by default Press ALT F8 Select SIDD and press the RUN button Press the SET UP NEW SIMULATION button Type test in the text box with the title Simulation Name Press the ENTER button Tick the box to direct the model to calculate statistics for equivalised income deciles Tick the box to indicate that comparative statistics with the population base should be evaluated Press the ENTER AND RUN button Press the LAUNCH MODEL button The model should then run through once again in around 6 7 hours This time however the simulations will project only forward through time taking the population characteristics back in time from the base specification When the model is complete please open the analysis _dec xls file that is created in the test simulation directory and check that all of the statistics reported in the differences with base sheet are close to zero 5 Page 3 Altering Parameters
69. see the section on Basic Code Structure for a description of a solution 2 Edit the program text 3 Save the revised text 39 Page 4 Re build the solution in a debug configuration a This essentially tells Fortran to use the new building blocks to create new program files b The debug configuration is designed to enable you to check that your revised program works as intended 5 Run some test analyses to make sure that the revised code works as intended 6 Re build the solution in a release configuration a Therelease configuration is designed to omit the checks implemented in the debug configuration and typically works much faster as a result 7 Run your desired analyses The following will walk you through how to use the debugger essentially addressing steps 1 4 and 5 listed above Opening a Solution 1 Double click on the file ANALYSIS sIn in the subdirectory FORTRAN analysis a This should open up the Visual Studio VS programming environment b If you followed the steps set out in the Section 2 this solution is now ready for editing please ensure that this is the case 2 Inthe solution explorer window expand the source files folder a Ifthe solution explorer window is not open then you can open it by selecting the View menu at the top of VS and then Solution Explorer b The following source files should be listed under the sourc
70. status of reference adult spouse NOTE emp 0 if not employed and higher numbers indicate higher labour supply equivalence scale of reference adult s household fuel duty paid per week household human capital wage potential per week savings held in an Individual Savings Account insurance standard rate duty paid per week insurance higher rate duty paid per week net contributions to individual savings account per week labour income of household per week proportion of time spent in leisure proportion of time marginal deduction tax rate fraction number of adults in household 1 singles 2 couples household net income per week National Insurance Contributions of household per week aggregate number of dependent children 44 Page nk_all obw OP_cont OPpen parttr1 2 pen_inc pcr PP_cont PPpen PPpenb prec prett_inc priv_penc ri semp sim_weight student tax taxAgg tbc_dy ret user_to Val vat_sr vat_rr Ww w2 wage_ offer wage_offer2 NxTxK NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT NxT Nx7xT NxT NxT NxT NxUxT NxT NxT NxT NxT NxT NxT NxT nk_all obw OPcont OPpenb parttr1 2 pen_inc PPcr PPcont PPpen PPpenb prec prett ppc ri semp sim_weight student tax taxagg tbc_dy ret number of children by childbirth year NOTE number of children from child birth age 2 at ti
71. subroutine and which are discarded after the subroutine is complete e Variables discarded after a subroutine is complete are commonly referred to as local variables You then add in programming code to undertake your desired calculations here KK K k END SUBROUTINE AA1 This line denotes the end of your subroutine The above covers just about everything you will need in relation to program structure There is however one final complication Fortran requires each variable that is used in any subroutine to be assigned a type real integer above In most cases the variables that you use will either be explicit inputs outputs of a subroutine or will be local variables that you don t mind discarding after your desired computations within the subroutine are complete Nevertheless there are a number of variables that you might want to make common to a range of subroutines without needing to repeatedly pass these variables as explicit inputs to each subroutine Examples in relation to tax and benefits calculations include the number of adults and children in a household the employment status of adult household members measures of gross income and so on This is achieved in the code using global variables e You will find in the set of source files included with the TAX program one called 2_global F90 e If you open this file then you will see that it includes a module named global_ tax O
72. utput yy Rpstt ptbmr m_pens_cost costs prett_inc benefit_s tax_s xx and then include xx in taxoutput just after the line user output add to the bottom here 4 The model will then include the associated statistics in the panel data generated for each simulated population under the name user_toX where X 1 2 3 etc for the first second and third output that has been added to the list of statistics reported by the tax function 47 Page 6 Best Practice Methods of Use This section provides a brief step by step guide concerning how the model should be used to explore the effects of policy alternatives The guide has been written so that it will be applicable to a wide range of alternative subjects of interest from studies concerned solely with the distributional implications of policy to those that focus on behavioural responses to policy counterfactuals Each step of a stylised analytical problem is described under separate section heading in approximate chronological order TIP it is incredibly important that you allow ample time to conduct your analysis Step 1 specify policy parameters There are two alternative ways to alter the policy environment in the model The first is to alter the parameters of existing model structure New users of the model are encouraged to select policy parameters using the Excel front end that is supplied with the file job file xls as described in Section 3 Advanced users may find it
73. variables are initialised which describe simulated micro data and high level characteristics a you can take a look at what the characteristics are by i open file 1b simdata f90 the population characteristics are then listed in the comment immediately under the start of the module ii Open file 1 GlobalParam f90 the high level population characteristics are listed in the comment under the start of the module iii A full list of the all global variables is provided in the table at the end of this section 3 Each requested analysis is then run a Developer routines which we may alter from time to time are provided in the file DeveloperRoutines f90 b If you decide to include a new analysis routine of your own then you should add this to the file UserAnalysisRoutines f90 We will not amend this file and you should take care to preserve your own version of this file whenever you update your version of the model 4 Problems are then reported 5 And the routine is exited Common programming steps It is beyond the scope of this manual to provide detailed advice concerning programming of new analysis procedures which is best understood by obtaining hands on experience Here we provide a brief over view of the steps involved in editing Fortran code and some advice concerning use of the debugging environment The following steps are usually involved when editing the Fortran code 1 Opena program solution
74. week disposable income disposable income private income taxes benefits per week unsecured debt Average value of unsecured debts by population decile f propn of population Proportion of decile with negative net liquid wealth cash on hand with unsecured debts net non pension assets Average value of net non pension assets by population decile Based only on data for households without unsecured debt pension wealth Average value of assets held in pensions total wealth total wealth net non pension assets unsecured debt pension wealth value function Remaining life time welfare Utility Units Percentage rather than absolute differences should be considered upper threshold for Threshold used to allocate households to deciles as considered in relevant decile worksheet As is implicit in the above discussion the sheet shows arithmetic differences for all variables except the value function Differences in expected lifetime utility between a given simulation and the associated simulation base are expressed either as compensating variations of liquid wealth equivalents or percentage differences as little meaning can be given to absolute differences 5 Adjusting the Program Code The model is programmed in Intel Visual Fortran and two aspects of the model code can be amended by the user the routines that calculate taxes and benefits in the model and routines that undertake
75. wing data in the form of Comma Separated Variable files age alc_dy bcohort ben ben_unit cons costs cp1 cp2 cpinc death_age dppart education emp1 2 eqs ful_ dy hhno hsgret humcap humcap2 ihr_dy inherit_age inherit_val isa isa_cont isr_dy labinc leis mdr na net nic nk nk_allX obw OPcont OPpen OPpenb parttr1 2 peninc ppc PPcont PPcr PPpen PPpenb prec prett ret age of reference adult alcohol duty paid per week birth cohort aggregate state welfare benefits received excluding state pensions per week benefit unit number in household imputed into WAS non durable discretionary consumption per week non discretionary housing and childcare costs per week first state contributory pension BSP fraction of full basic state pension second state contributory pension S2P per week state pension income cp1 2 received per week age at which reference adult dies flag 1 if default is to participate in personal pensions 0 to not participate highest education level achieved during the simulated lifetime employment status of reference adult spouse equivalence scale fuel duty paid per week household number as reported in WAS unrealised capital gain on housing wealth per week household human capital wage potential per week NOT APPLICABLE insurance higher rate duty paid per week age at whic

LINDA manual - National Institute of Economic and Social

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