RUSMOD is the first full-scale model in Russia that simulates most of the existing monetary taxtransfer policies implemented at the federal and regional levels for a nationally representative sample of the population. Currently, it covers two policy years – 2010 and 2017. RUSMOD is built on the EUROMOD platform. EUROMOD provides stand-alone and custom-built software for modeling taxbenefit systems. It features a specific modeling “language” (i.e. generic routines for performing various calculations to determine tax liabilities and benefit entitlements) and a user-friendly interface with extensive integrated help. EUROMOD software can be used in combination with other software (by supporting command-line execution), which enables the integration of EUROMOD calculations into other statistical packages or automated systems as well as linking EUROMOD tax-benefit models with other type of models (e.g. labor supply, general equilibrium and macro models). The software is free for non-commercial use.

EUROMOD has many spin-offs for non-EU countries, RUSMOD being one of them. EUROMOD is continually being improved and updated (Sutherland & Figari, 2013). The process of construction and development of RUSMOD is documented in Popova (2012) and Popova (2013). Using EUROMOD as a platform for constructing the Russian microsimulation model has a number of advantages: (1) it enables us to capture the full complexity of the Russian tax-benefit system, (2) it is flexible so that users are able to alter policy parameters and build in new policies, (3) it can be used for cross-national policy comparisons; (4) it can be used to disentangle the distributional impact of policy changes over time; (5) it can be used for “nowcasting” the income distribution; and (6) it can serve as a platform for analyzing behavioral changes due to policy reforms. These mark a difference with respect to previous fiscal incidence instruments built for Russia, including those based on the CEQ methodology (e.g. Lopez-Calva et al. (2017), Popova et al. (2018)).

The aim of building RUSMOD was to simulate as many existing policies as possible. However, due to the data constraints not all the taxes and social benefits are simulated by the model. First, some policies are beyond the scope of the model entirely or there are little or no data for that purpose. This refers to corporate taxes and in-kind benefits (such as free or subsidized health care, education and other social services). Theoretically these elements can be accounted for within the model framework using some imputation techniques. However, they have been ignored, at least temporarily, to limit complexity and to keep model building manageable. Second, due to lack of the relevant data in the survey many allowances could not be simulated. For example, contributory pensions are not simulated because the simulation requires information about the contribution record and wages over a person’s lifetime. If information about this type of allowances is collected in the data, they are included in the model, but the rules governing them may not be changed by users. Apart from all pensions, these include: a monthly cash payment, cash and near-cash categorical benefits (e.g. discounts for housing and utilities, transportation, medication, etc.), unemployment benefit, scholarships. Third, some benefits are accounted for in the original data, but cannot be separated from other payments. For example, a social supplement to pensions (a means-tested program which tops up incomes of non-working pensioners to a pensioner’s poverty line) is paid together with pensions and the recipients are not capable to tell how much they have received due to this particular program. Finally, there are some programs targeted at smaller groups of the population that neither can be simulated due to the lack of data, nor are available in the database, e.g. payments to families with foster/adopted children, payments to careers of the disabled relatives, child benefits for families of individuals who are in the military service, etc.

Figure 1 includes a diagram that illustrates this sequence of simulations in the model. The starting point of simulations in RUSMOD are net market incomes that are reported in survey data. However, 5