@article {10.34196/ijm.00324,
article_type = {journal},
title = {Dealing with Residents and Cross-borders in a Tax-benefit Model for Luxembourg},
author = {Liégeois, Philippe},
volume = 18,
number = 2,
year = 2025,
month = {aug},
pub_date = {2025-08-20},
pages = {94-123},
citation = {IJM 2025;18(2):94-123},
doi = {10.34196/ijm.00324},
url = {https://doi.org/10.34196/ijm.00324},
abstract = {The models presented in this paper are intended to contribute to a debate on the impact of hypothetical changes in social security contributions and personal income tax on the distribution of household disposable income and on total public financial revenue from these sources for Luxembourg. Our aim is to take account as far as possible of the non-linearity of socio-fiscal systems and the precise structure of populations, hence the need for microsimulation modelling of both resident and cross-border commuter households. This latter population is involving an essential innovative extension compared with previous assessments. Cross-border commuters are very important in Luxembourg, accounting for over 40\% of total employment: 41\% in 2017, 43\% in 2022. Static microsimulation tools and data are already available for residents (mainly via EUROMOD and EU-SILC), but not for cross-border commuter households. Therefore, there is need for a secondary simulation framework, for example based on EUROMOD and HFCS data (offering some information for cross-border commuters in addition), separately for resident and cross-border commuter households. Such publicly available distributional views on residents and cross-border commuters in countries with high openness where the latter may play an important role in public accounts are not numerous, or even unique in Luxembourg, if we except (expected) imputation-based approaches. The aim of this methodological article is to present the EUROMOD-type models implemented for the resident and cross-border commuter populations in Luxembourg and to highlight the particularities of their construction. Using these tools, we are then able to provide a complementary overview of the two populations “as they are today”. Another objective is to provide a toolbox for an immediate overview of tracks for − and impact of − changes in socio-economic policies. Given the important structural differences between resident and cross-border commuter populations in terms of socio-economic status and gross labor and taxable incomes, we show and explain to what extent total revenues from residents are higher than those from cross-border commuters, even considering the relative sizes of the two populations. For the same reason, a change in the socio-fiscal system of policies in Luxembourg could have remarkably different effects between cross-border commuter households and residents. More specifically, these results could also partially serve as a basis for the debate on a pension reform recently launched in Luxembourg. This research was initiated by the \textit{Chambre des Salariés du Luxembourg} (CSL). Consequently, the contents reported here result from exchanges with social partners (not all of whom are familiar with the technicalities of the context). Such a context allowed us to propose an approach more in line with the questions and final expectations of our usual public targets. The present paper also aims to “open the black box”, which can lead to contents that are sometimes technical, but accessible to “practitioners” who would like to better understand the underlying forces and rely on these models for subsequent counterfactual analyses.},
keywords = {static microsimulation, cross-border workers, EUROMOD, HFCS data, Luxembourg},
journal = {IJM},
issn = {1747-5864},
publisher = {International Journal of Microsimulation},
}