Annex 4 analytical methods

model description

general description

acronym: BeTa

name: BeTa-MKV An Estimated General Equilibrium Open Economy Monetary Model of Interacting European Economies

main purpose: The BeTa model is a macroeconomic model is able to control for the complex economic interactions which might result from, for example, impacts of additional taxes used to fund the training entitlements and automation in response to higher productivity. As a forecasting model, it is able to provide an assessment of medium to long-effects on output and employment.

homepage: —

Developer and its nature

ownership: Third-party ownership (commercial companies, Member States, other organisations, …)

ownership additional info: —

is the model code open-source?: NO

Model structure and approach with any key assumptions, limitations and simplifications

details on model structure and approach

The following detailed assumptions are used in determining the exact input data for the BeTa model:

training is funded through additional public resources: private resources that are freed through deadweight loss for the public authorities, are reflected in the simulation as higher disposable income for individuals and lower costs of labour for employers;
no substitution effects with existing public training support schemes: those participating in training would have either not participated in absence of support or done so thanks to individual, private resources;
additional investment in upskilling activities resulting from voluntary cost-sharing is assumed away;
given the model is based on the representative agent, individuals are not heterogeneous. The simulation focuses on the EU-average annual value of training undertaken irrespective of any dynamics linked to individual accumulation. Decreasing marginal returns over time are also assumed;
from a long-term perspective, fixed set up costs are omitted. This is justifiable because from a long-term perspective, one-off costs become negligible. Hence, the focus lies on operational yearly costs;
the average cost of training for the EU-27 estimate is calculated based on the number of training entitlements redeemed by each target group, in each country, using as deflators for the education sector as per the cost benefit analysis. It is therefore a weighted average which adjusts to the amount of entitlements used by each country and target group.
input data used for this simulation is based on the middle ground scenario for the take up rate of the training entitlements and considers, as net effects on training participation, all the economically relevant additionality in training undertaken (i.e. all the training which would have not been undertaken without the training entitlements).
wage levels are left free to fluctuate to ensure macroeconomic coherence in combination with the increases in taxes, monetary transfers (training purchased with public resources that would have been purchased through private ones) and effects on the job matching function. This is necessary as all these factors (taxes, transfers and changes to job finding rates) affect the value wages at equilibrium levels, hence it is impossible to fix them exogenously.

model inputs

The model inputs consist of a rich and large dataset which is required by the estimation strategy. The data that will be used in the estimation stage are:

GDP, consumption,
investment,
imports,
exports,
wages;
the unemployment rate,
the rates of change of the price deflators for consumption,
import,
export,
nominal effective exchange rate,
the domestic and the monetary policy short term interest rate,
labour force,
participation rates,
data on R&D,
human capital

model outputs: The model outputs consist of the provision of different socio-economic scenarios. The focus will lie in particular on GDP and employment outcomes as a result of the provision of training entitlements.

Intended field of application

policy role: Macroeconomic modelling using the BeTa model is able to control for the complex economic interactions which might result from, for example, impacts of additional taxes used to fund the training entitlements. As a forecasting model, it is able to provide an assessment of medium to long-effects on output and employment.

policy areas

Education and training
Economy, finance and the euro
Taxation
Employment and social affairs
Energy
Environment
Budget
Consumers
Research and innovation
Single market
Trade
Banking and financial services
Youth
European neighbourhood policy

Model transparency and quality assurance

Are uncertainties accounted for in your simulations?: YES

Has the model undergone sensitivity analysis?: YES

Has the model been published in peer review articles?: NO

Has the model formally undergone scientific review by a panel of international experts?: YES

Has model validation been done? Have model predictions been confronted with observed data (ex-post)?: YES

To what extent do input data come from publicly available sources?: Based on both publicly available and restricted-access sources

Is the full model database as such available to external users?: NO

Have model results been presented in publicly available reports?: YES

Have output datasets been made publicly available?: NO

Is there any user friendly interface presenting model results that is accessible to the public?: NO

Has the model been documented in a publicly available dedicated report or a manual?: NO

Intellectual property rights

Licence type: Non-Free Software licence

application to the impact assessment

Please note that in the annex 4 of the impact assessment report, the general description of the model (available in MIDAS) has to be complemented with the specific information on how the model has been applied in the impact assessment.

See Better Regulation Toolbox, tool #11 Format of the impact assessment report).