Introduction

This report is the central delivery of Work Package 1 of the WELTRANSIM project, a project of the Horizon 2020 Joint Program Initiative More Years, Better Live’s second joint transnational call entitled Welfare, Wellbeing, and Demographic Change: Understanding Welfare Models. The core of this work package is the development and application of the comparative dynamic microsimulation model microWELT (Welfare Transfer) based on newly developed disaggregated National Transfer Account (NTA) data. The work package studies the interactions between welfare state regimes, welfare transfers, and population ageing accounting for educational change, life expectancy differentials by education, and changing family patterns. We contribute to existing research by obtaining and using new detailed NTA data on income, consumption and welfare transfers by age, sex, education and the family type and by developing and applying innovative modelling tools. Concerning data development, we follow the methodology of the National Transfer Accounts (NTAs), which breaks down national accounts by age and sex - in our case, further disaggregated by education and family type. This approach offers a comprehensive measure of how resources move across age and population groups employing three devices: Asset-based reallocations, public transfers, and private transfers within and between families.

MicroWELT simultaneously depicts and projects key socio-demographic characteristics of the studied populations, as well as transfer-flows as captured by the NTA accounting framework. The study compares four European countries – Austria, the UK, Finland, and Spain – representing four welfare state regimes: Corporatist-Statist, Liberal, Social Democratic, and Familial / Mediterranean. MicroWELT captures critical features of these welfare state regimes expressed in socio-demographic patterns and processes, transfer flows, and the adaptation mechanisms addressing sustainability issues resulting from population ageing. Individual accounts allow for the longitudinal analysis of transfer flows between population groups and generations. We complement this analysis by applying the static microsimulation model EUROMOD for a more detailed distributional study. EUROMOD is also used for identifying adaptation mechanisms to demographic changes attributable to welfare state regimes, the latter informing the adaptation mechanisms for balancing the various transfer accounts implemented in microWELT. Conversely, microWELT is used to project detailed population weights used in EUROMOD for static ageing scenarios, complementing the analysis of sustainability and distributional issues arising from population ageing.

Organization

This report is organized into nine chapters. It is complemented by a collection of online resources like analysis scripts, the model code, and model downloads available at the project website (microWELT.eu)

Chapter 1 introduces the microWELT model. Starting from its objectives, we discuss design choices, the model architecture and key features. microWELT provides a demographic projection tool reproducing Eurostat population projection but adding details such as education, intergenerational transmission of education, fertility by education, partnership patterns, and mortality differentials by education. The model integrates transfer flows as captured by the National Transfer Account (NTA) accounting framework and calculates a set of indicators based on NTA literature. Individual accounts allow the study of transfers over the whole life cycle by cohorts and between generations. This chapter is also available as a self-contained research paper:

Spielauer, Martin, Thomas Horvath, Marian Fink (2020) microWELT - A Dynamic Microsimulation Model for the Study of Welfare Transfer Flows in Ageing Societies from a Comparative Welfare State Perspective. WIFO Working Paper 609/2020 pdf

Chapter 2 provides an overview of the socio-demographic core modules of the microWELT model. It describes the essential socio-demographic characteristics of the studied countries and the processes that drive socio-demographic change which we aim at capturing with the model. Processes with potential links to welfare state types include (1) the intergenerational transmission of education, (2) childlessness and fertility by education, (3) partnership behaviours and lone parenthood, (4) age at leaving home, and (5) mortality differentials by sex and education. Through MicroWELT projections, we identify the impact of these processes on the future population composition by age, sex, education, and family characteristics of the studied countries. This chapter is also available as a self-contained research paper:

Spielauer, Martin, Thomas Horvath, Walter Hyll, Marian Fink (2020) microWELT: Socio-Demographic Parameters and Projections for Austria, Spain, Finland, and the UK WIFO Working Paper 6011/2020 pdf

Chapter 3 presents the dis-aggregated age profiles of NTA variables derived in this project. NTA variables capture private and public consumption by type, labour and asset income, and key transfer flows both public and private. NTA data are typically available by age and sex only. In this project, we further disaggregate these measures by education level, partnership status, parenthood, and school enrolment. The resulting data constitute key parameters of the MicroWELT model.

Chapter 4 studies how changes in the population composition by education and family characteristics impact on indicators of the economic effects of population ageing based on National Transfer Accounts (NTAs). A variety of indicators based on NTA data combined with population projections was developed in the literature, of which we have selected two for our analysis: The Support Ratio (SR) and the Impact Index (IMP). We complement existing projections by using new disaggregated NTA data by education and family type, contrasting the results to the same indicators based on NTAs by age. The projection analysis is performed using microWELT, which provides the required detailed socio-demographic projections. The study compares results for Austria and Spain. Our results show that indicators based on disaggregated data can give a very distinct picture of the economic effects of population ageing. This chapter is also available as a self-contained research paper:

Spielauer, Martin, Thomas Horvath, Marian Fink, Gemma Abio, Guadalupe Souto, Ció Patxot and Tanja Istenič (2020) microWELT - Microsimulation Projection of Indicators of the Economic Effects of Population Ageing Based on Disaggregated National Transfer Accounts (NTAs) pdf

Chapter 5 discusses the indicators of the economic effects of population ageing developed in Chapter 4 from a comparative welfare state perspective. This analysis includes all four countries studied in the WELTRANSIM project (Austria, the UK, Finland, and Spain).

Chapter 6 complements the microWELT analysis by applying the static microsimulation model EUROMOD for a more detailed cross-sectional depiction of the redistributive mechanisms of welfare states and the impact of socio-demographic change on the system sustainability. microWELT is used to project detailed population weights used in EUROMOD for static ageing scenarios, complementing the analysis of sustainability and distributional issues arising from population ageing.

Chapter 7 studies the effect of population ageing on the inter- and intra-generational redistribution of income from a longitudinal perspective, comparing lifetime measures of income and transfers by generation, gender, education and family characteristics. For this end, we incorporate new disaggregated National Transfer Account (NTA) data and concepts of generational accounting into the dynamic microsimulation model microWELT. This bottom-up modelling strategy makes it possible to project, for each generation and sociodemographic group, the net present value of expected transfers. The model allows incorporating mechanisms to balance budgets over time in response to population ageing. Our study compares the results for Spain and Austria. This chapter is also available as a self-contained research paper:

Spielauer, Martin, Thomas Horvath, Marian Fink, Gemma Abio, Guadalupe Souto, Ció Patxot and Tanja Istenič (2020) microWELT: Microsimulation Projection of Full Generational Accounts for Austria and Spain WIFO Working Paper 618/2020 pdf

Chapter 8 discusses the Net Present Values of lifetime transfers and the Full Generational Accounts developed in Chapter 7 from a comparative welfare state perspective. This analysis includes all four countries studied in the WELTRANSIM project (Austria, the UK, Finland, and Spain).

Chapter 9 summarizes and discusses the key findings of the research presented in this report.