The University of Tampere is participating in an international project in which a microsimulation model is being drafted for the evaluation of the price effects of taxation and the transfer of income in developing countries.
'The model helps in the planning of the overall picture. It shows the biggest loopholes in the security networks, offers possible fixes and suggests various kinds of transfers of income,' says Jukka Pirttila, professor of economics at the University of Tampere, School of Management.
Pirttila studies the public economies of developing countries in a shared project by the University of Tampere and UNU-WIDER (World Institute for Development Economics Research). He coordinates the compilation of the SOUTHMOD microsimulation model in the international project carried out with the University of Essex (UK) and SASPRI institute (South Africa).
The first countries to apply the new microsimulation model include Ethiopia, Ghana, Mozambique, Tanzania, and Zambia in Africa, as well as Ecuador in South America and Vietnam in Asia. The countries have free access to the model.
'Researchers from the participating countries have also participated in the creation of the models. The idea is for them to teach their countrymen to use these services as part of the contract. We are now in the stage where the first training events are to be organised this spring,' Pirttila says.
The model helps calculate the effects of changes
The governments of developed countries, like Finland, use a simulation model for calculating the effects of reforms in taxation policies and the transfer of income. The Finnish system is called Sisu.
'Simulation refers to the fact that the system can be used to change the taxation or employment benefit systems, for example, and to see who will benefit from the change, and what the costs are. It is a basic tool used in all OECD countries,' says Pirttila.
The SOUTHMOD project first created one shared simulation model, to which country-specific information was coded at a later time.
Many developing countries are only now designing social security systems for helping the poorest of their people.
Many of the helping countries allocate their development aid to countries with a lower income level which aim for a higher income level.
'When the income level of a country rises, the development aid must be replaced with a separate tax, and for that phase, this model is perfect,' Pirttila says.