Rodrigo Chang Huaita

PERUMOD is a tax-benefit microsimulation model for Peru, is a highly versatile yet easy-to-use tool for policymakers and researchers alike. It allows the user to analyze and compare the effects of different benefit policy scenarios on poverty, inequality, and government revenues. The model applies user-defined tax and benefit policy rules to micro-data on individuals and households and calculates the effects of these rules on household income.

With PERUMOD, users can simulate reforms of the Peruvian tax and benefit system. They can estimate, for example, the number of beneficiaries and analyze the characteristics of the prospective recipients of a hypothetical benefit. PERUMOD also allows users to implement hypothetical income tax and social security reforms and calculate their effects on inequality and the government budget. Existing policies or past policy reforms can be evaluated as well.

PERUMOD has been developed by Javier Torres and Rodrigo Chang from Universidad del Pacifico and updated in collaboration with UNU-WIDER and Xavier Jara from the International Inequalities Institute at the London School of Economics and Political Science.

Research:

The role of tax-benefit systems in protecting household incomes in Latin America during the COVID-19 pandemic

Authors: David Rodríguez, H Xavier Jara, Mariana Dondo, Cristina Arancibia Romero, David Macas Romero, Rebeca Riella, Joana Urraburu, Linda Llamas, Luis Huesca Reynoso, Javier Torres, Rodrigo Chang

Abstract: The COVID-19 pandemic drastically affected household incomes around the world. In developed economies, pre-pandemic tax-benefit policies and emergency transfers mitigated to a large extent the negative income shock. However, less is known about the effect of government intervention on household incomes in developing countries. The aim of this paper is to assess in a comparative way the role of tax-benefit policies in protecting household incomes during the pandemic in seven Latin American countries: Argentina, Bolivia, Colombia, Ecuador, Mexico, Peru, and Uruguay. Departing from previous studies, we assess the effects both of expanded social assistance programmes and of automatic stabilizers (i.e. pre-pandemic taxes and benefits). We find an important cushioning effect of emergency policies at the bottom of the pre-pandemic income distribution, whereas automatic stabilizers are mostly present at the top of the distribution as a result of reduced social insurance and tax payments during the pandemic.

Assessing the cushioning effect of tax-benefit policies in the Andean region during the COVID-19 pandemic

Authors: Andrés Avellaneda, Rodrigo Chang, Diego Collado, H Xavier Jara, Andrés Mideros, Lourdes Montesdeoca, David Rodríguez, Javier Torres, Omar Vanegas

Abstract: This paper aims to assess the role of tax-benefit policies in mitigating the effects of the COVID-19 crisis on the distribution of household disposable income in Colombia, Ecuador and Peru. Tax-benefit microsimulation and nowcasting techniques are used to adjust 2019 microdata to reflect the labour market and earnings situation observed in official labour force surveys collected during the pandemic. Our results show a sharp drop in household disposable income and a dramatic increase in poverty and inequality during the second quarter of 2020, with the national poverty headcount increasing by 73% in Colombia and more than doubling in Ecuador and Peru. By the end of 2020, the economy recovers but poverty and inequality remain above the pre-pandemic levels. COVID-related policies cushion the effect of the crisis at the bottom of the distribution, and their effect on poverty and inequality largely depends on the generosity of the benefits.

PERUMOD report:

SOUTHMOD country report Peru - PERUMOD v2.5

This report documents PERUMOD, the SOUTHMOD model developed for Peru. This work was carried out by UNU-WIDER in collaboration with the Universidad del Pacífico (UP) in Peru. The results presented in this report are derived using PERUMOD version 2.5, which is part of the SOUTHMOD bundle (SOUTHMOD_A2.0) and runs on EUROMOD software.

The report describes the different tax-benefit policies in place, how the microsimulation model picks up these different provisions, and the database on which the model runs. It concludes with a validation of results against external data sources for Peru.

The PERUMOD model and its documentation in this country report has been prepared within the UNU-WIDER project SOUTHMOD—simulating tax and benefit policies for development (Phase 3), which is part of the Domestic Revenue Mobilization programme Phase II. For further information on access to the model, see the PERUMOD page.