SOUTHMOD – simulating tax and benefit policies for development
The International Inequalities Institute is the partner of SOUTHMOD, a major international research project financed by UNU-WIDER to develop and use tax-benefit microsimulation models for selected developing countries.
Many low- and middle-income countries are working towards building up their redistributive and social protection systems, particularly in view of the growing risk of future economic crises. In these countries, sustainable financing of public spending in social protection and redistribution would also require increasing fiscal capacity through direct and indirect taxation. Therefore, understanding how the design of the tax-benefit system affects household incomes is crucial to develop effective policies to protect the most vulnerable.
Research under the SOUTHMOD project aims to promote the use of microsimulation models to analyse the impact of different tax-benefit policy reforms on household incomes and government revenues in the Global South. The project represents a major international collaboration between LSE, UNU-WIDER, the Southern African Social Policy Research Insights (SASPRI), and researchers from the low- and middle-income countries for which the models have been built. The III will also play a major role building capacity in these countries to encourage the use of microsimulation models among academics and policy makers.
Highlights:
- Training to Ecuador's National Statistical Institute (INEC)
III researchers delivered specialized training to Ecuador's National Statistical Institute (INEC) in October 2024. This training operates under a formal Memorandum of Understanding between INEC and III. - BOLMOD
In September 2024, Dr H. Xavier Jara conducted intensive training at Bolivia's Ministry of Economy and Public Finance on BOLMOD. The training engaged officials from multiple ministries, the National Statistical Office, and Vice-minister Carlos David Guachalla Terraza. - PERUMOD and CRIMOD
Two training courses on the use of tax-benefit microsimulation for policy analysis were successfully delivered to government officials in Peru and Costa Rica. The workshops included participants from government ministries, central banks and tax authorities of each country.
Tax-benefit microsimulation
Tax-benefit microsimulation models combine detailed coding of the legislation of taxes and benefits with representative household level data on incomes and expenditures to simulate individual and household tax liabilities and benefit entitlements in each country.
The models can be used to assess the extent to which policy reforms contribute to changes in poverty and inequality and to make comparisons over time and across countries. They can also be used to simulate the effect of proposed or hypothetical policy reforms and to assess the cushioning effect of taxes and benefits in the event of economic shocks or demographic changes.
Microsimulation models are regularly used by researchers and policy makers in high-income countries. However, such tools are seldom available in low- and middle-income countries, despite the need to assess the effect of taxes and benefits in view of increasing fiscal capacity to build up more sustainable social protection systems.
SOUTHMOD
The SOUTHMOD project was launched in 2016 by UNU-WIDER to develop and encourage the use of tax-benefit microsimulation models for selected developing countries. The SOUTHMOD project currently hosts models for seven African countries (Ethiopia, Ghana, Mozambique, Rwanda, Tanzania, Uganda, Zambia), four Latin American countries (Bolivia, Colombia, Ecuador and Peru) and one country in Southeast Asia (Vietnam).
The International Inequalities Institute (III) joined the SOUTHMOD project in 2022. Dr Xavier Jara coordinates the maintenance and use of the four Latin American microsimulation models which are part of SOUTHMOD: BOLMOD for Bolivia, COLMOD for Colombia, ECUAMOD for Ecuador and PERUMOD for Peru.
SOUTHMOD represents a major international collaboration involving UNU-WIDER, the Southern African Social Policy Research Insights (SASPRI), and researchers from the countries for which the models are built.
Open access and capacity building
All models developed under the SOUTHMOD project are based on the EUROMOD platform and are freely available for non-commercial use. To ensure cross country comparability, SOUTHMOD provides a common modelling framework based on standard rules to handle data and policy simulations (SOUTHMOD modelling conventions). The models are updated annually to capture regular changes in taxes and benefits in each country.
An important part of the project involves building capacity in low- and middle-income countries to encourage the use of microsimulation models for academic research and policy analysis.
The III will play a key role in organizing regular training for local researchers and policy makers in Latin America to expand the network of microsimulation users and to foster interaction between academics and government institutions in the region.
- Dr H. Xavier Jara, Assistant Professorial Research Fellow, International Inequalities Institute, LSE
- Dr Pia Rattenhuber, Research Fellow, UNU-WIDER
- Dr Jesse Lastunen, Research Associate, UNU-WIDER
- Dr Anna Zasova, Research Associate, UNU-WIDER
- Dr Kwabena Adu Ababio, Research Associate, UNU-WIDER
- Dr Rodrigo Oliveira, Research Associate, UNU-WIDER
- Professor Jukka Pirttilä, Professor of Public Economics, University of Helsinki and Non-Resident Senior Research Fellow, UNU-WIDER
The SOUTHMOD team has delivered targeted capacity-building training to key government institutions across Latin America, demonstrating direct knowledge exchange between academic research and policy implementation.
- III researchers delivered specialized training to Ecuador's National Statistical Institute (INEC) in October 2024, focusing on intergenerational mobility and inequality of opportunity analysis using administrative data. This training operates under a formal Memorandum of Understanding between INEC and III, establishing ongoing collaboration for evidence-based policy development.
- In September 2024, Dr H. Xavier Jara conducted intensive training at Bolivia's Ministry of Economy and Public Finance on BOLMOD, the tax-benefit microsimulation model developed through the III's SOUTHMOD project. The training engaged officials from multiple ministries and the National Statistical Office, culminating in discussions with Vice-minister Carlos David Guachalla Terrazas on tax-benefit reform simulations.
- From the 6 to 8 May 2024, Dr Xavier Jara in collaboration with Universidad de Costa Rica organised the first training and launch event on CRIMOD, the tax-benefit microsimulation model for Costa Rica. The workshops included participants from government ministries, central banks and tax authorities of each country.
- Two training courses on the use of tax-benefit microsimulation for policy analysis were successfully delivered to government officials in Peru and Costa Rica. From the 20 to 23 November 2023, Dr Xavier Jara in collaboration with Universidad del Pacífico organised the first training and launch event on PERUMOD, the tax-benefit microsimulation model for Peru.
- On 5 September 2023, SOUTHMOD partners gathered for the annual SOUTHMOD workshop to exchange experiences and knowledge on tax-benefit microsimulation modelling in developing countries. The in-person part took place in Oslo, Norway, back-to-back with the WIDER Development Conference on domestic revenue mobilization.
- A training course was successfully held on the use of the microsimulation model ECUAMOD for economic and social policy research.
The training course took place from 31 July to 4 August 2023 at Facultad Latinoamericana de Ciencias Sociales (FLACSO) in Quito, Ecuador. Among the attendees were PhD and Master students of Ecuadorian Universities as well as representatives from the Tax Revenue Service and the Ministry of Economy and Finance from Ecuador. - A training course was successfully organized on the use of the microsimulation model COLMOD. The training course took place from 10 to 14 July 2023 at Universidad Externado de Colombia. Among the attendees were PhD and Master students of Colombian Universities as well as representatives from the Ministry of Agriculture, the Department for Social Prosperity, the National Tax and Customs Directorate, among others.
- The new microsimulation models for all countries were released to the public in May 2023. III work featured directly as the new models for Bolivia, Colombia and Peru were included. Find out more.
Jara, H. X., Montesdeoca, L., Colmenarez, M. G. & Moreno, L. (2025). Two decades of tax-benefit reforms in Ecuador: How much have they contributed to poverty and inequality reduction? World Development, https://doi.org/10.1016/j.worlddev.2025.106976
Jara, H. X., Rodríguez, D., Collado, D., Torres, J., Mideros, A., Montesdeoca, L., Avellaneda, A., Chang, R., & Vanegas, O. (2025). Assessing the role of tax-benefit policies during the COVID-19 pandemic: Evidence from the Andean region. Review of Development Economics, 226-246. https://doi.org/10.1111/rode.13125
Jouste, M., Kanbur, R., Pirttilä, J. and Rattenhuber, P. (Eds.) (2025) Poor Protection: The Role of Taxes and Social Benefits in the Developing World During Crises. Oxford University Press. WIDER Studies in Development Economics. Oxford University Press.
Jara, H.X., Rodríguez, D., M. Dondo, C. Arancibia, D. Macas, R. Riella, J. Urraburu, L. Llamas, L. Huesca, J. Torres and R. Chang (2025). ’The Role of Tax–Benefit Systems in Protecting Household Incomes in Latin America during the Covid-19 Pandemic’ in Poor protection: The role of taxes and social benefits in the developing world during crises, Edited by Maria Jouste, Ravi Kanbur, Jukka Pirttilä, Pia Rattenhuber, Oxford University Press.
Jara, H. X., Montesdeoca, L., Colmenarez, M. G. and Moreno, L. (2024). El efecto de los impuestos directos y las transferencias monetarias sobre la pobreza y la desigualdad en Ecuador. In H. X. Jara, A. Mideros & M. G. Palacio (Eds.), Política social, pobreza y desigualdad en el Ecuador: 1980-2021. Centro de publicaciones PUCE.
Lastunen, J., de Mahieu, A., Gasior, K., Jara, H.X., Pirttilä, J. (2024) Microsimulation of tax-benefit systems in the Global South: a comparative assessment. WIDER Working Paper 2024/35. Helsinki: UNU-WIDER. https://doi.org/10.35188/UNU-WIDER/2024/439-9