VNMOD Research Retreat

Hanoi, 25–29 July 2022

INTRODUCTION TO VNMOD 2.3

Anh Duong Nguyen & David McLennan

 Tax-benefit microsimulation modelling
hhid persid age income
1
1
1
2
50
45
2000
1000
• Social benefits
1
1
3
4
12
14
.
. • Taxes
1 5 2 .
• Social insurance
Micro data on
2 1 89 1500
2 2 90 1000
3 1 25 2000 contributions
households
3
3
2
3
24
2
.
.
3 4 3 .

• Family structure
Policy rules based on
• Gross incomes relevant legislation
• Expenditures
• …
The model_
 Tax-benefit microsimulation modelling
hhid persid age income
1
1
1
2
50
45
2000
1000
• Social benefits Obtain impact of
1
1
3
4
12
14
.
. • Taxes policies at the
1 5 2 .
• Social insurance individual and
Micro data on
2 1 89 1500
2 2 90 1000
3 1 25 2000 contributions
households
3
3
2
3
24
2
.
.
government level • How do policy reforms
3 4 3 .
influence poverty,
inequality, tax
progressivity, public
Reform
revenues, etc.?

• Family structure
Policy rules based on • Taxes paid
• Gross incomes relevant legislation • Benefit amounts
• Expenditures • Public tax receipts
• … • Social protection
Inform government
The model_ expenditures
and research

3
Process recap
– 2015-2016: Feasibility study.
– 2016-2018: Early model development work, focusing on simulation of taxes  VNMOD v1.0.
– 2019: Refinements to adhere to SOUTHMOD Modelling Conventions (SMC)  VNMOD v1.3.
– 2020: Further improvements, including simulation of benefits, and inclusion of new underpinning
data from VHLSS 2018  VNMOD v2.1.
 Plus, commencement of parallel study focusing on effects of COVID-19, and mitigating policies.

– 2021: Training event (January 2021: hybrid of in-person + Zoom), plus further improvements to
model  VNMOD v2.2.
 And completion of parallel COVID-19 study.

– 2022 January – June: Further improvements to the model, incl. COVID-19  VNMOD v2.3.
 2022 July – December: addition of new underpinning data from VHLSS 2020  VNMOD v3.0.
Input data
– Household data: Vietnam Household Living Standard Survey;
 Most comprehensive data set on households in VN;
 Latest VHLSS data wave in VNMOD v2.3 = VHLSS 2018.
 VHLSS 2020 will soon be incorporated into VNMOD.
 Monetary values are uprated by CPI to account for changes since survey
enumeration time period.
New aspects
– Tax and benefit policy rules updated, if necessary.
– Improvements to the simulation of ‘household consumption’.
– Incorporation of certain elements from COVID-19 parallel
study.
– Small number of refinements to underpinning datasets
(derived from VHLSS) to support refinements to model.
Main caveats
– Not all tax and benefit policies are modelled in full.
 Some can only be partially modelled;
 Others cannot be modelled at all.

– Difficulty in obtaining comparable external validation

statistics on aggregate (national level) tax revenues and
benefit expenditures  how well do our models perform…?
Main assumptions
– Income earned uniformly across the year (COVID-19 and
related months);
– Income effect on consumption invariant across all products;
– Increase/decrease in income of any individual does not affect
income and/or employment opportunity of others;
– Changes in policy are fully complied with, without
compliance costs.
Key lessons
– Keep track of policy changes;
 Interactions with stakeholders (esp. policy ones)

– Manage the learning curve (instructions/guidelines + practice

+ team support);
– Note down the (even implicit) assumptions along the
process.
Future plans (1)
– Modeling:
 Update country report for 2022;
 Update of policy spine (tax policies + benefits);
 Uprating alternatives;
 Integrated
– Data:
 Incorporate VHLSS 2020.
Future plans (2)
– Dissemination and network-building:
 This training retreat.
 Report and engagement of Government stakeholders (GSO, MOF, SSV).
 Networking with research institutes and other stakeholders in Vietnam.
 www.wider.unu.edu
Helsinki, Finland

ciem.org.vn
Hanoi, Viet Nam

www.saspri.org
Hove, United Kingdom