Abstract:
Tax and benefit microsimulation models (MSMs) and fiscal incidence analyses (FIAs) are important tools for understanding how fiscal policies affect households across the income distribution. They are used to assess who bears the burden of taxation, who benefits from public spending, and how alternative fiscal reforms may affect poverty, inequality, and the public finances. Interest in these approaches has grown substantially in low- and middle-income countries (L&MICs) over the past two decades, driven by improvements in household survey data, expanding administrative data systems, and an increasing policy focus around poverty reduction, inequality, and domestic revenue mobilisation. This report compares three families of models that have been developed and applied in L&MICs: SOUTHMOD, led by UNU-WIDER and based on the EUROMOD platform; TaxDev models, developed by the Institute for Fiscal Studies (IFS); and CEQ models developed by the Commitment to Equity Institute, alongside related tools implemented by the World Bank. Although all these approaches seek to analyse the distributional effects of fiscal policy, they differ in their objectives, analytical architecture, methodological assumptions, country coverage, institutional arrangements, and intended users.
