Microsimulation in Indonesia: an in-house government research tool

Ali Moechtar

Gantjang Amannullah

Ratnawati Muyanto

A new tax-benefit microsimulation model for Indonesia called INDOMOD was built in 2019 using the EUROMOD software

The project was coordinated by the Ministry of Finance of the Government of Indonesia, which convened a Working Group comprising representatives of key government departments including Statistics Indonesia.

UNICEF Indonesia and Southern African Social Policy Research Insights (SASPRI) a not-for-profit organisation in the United Kingdom, entered into an agreement to support the Government of Indonesia in building INDOMOD. As well as granting permission for the EUROMOD software to be used for this purpose, the EUROMOD team at the University of Essex also provided technical advice while INDOMOD was being built.

INDOMOD was constructed for use as an in-house research tool for the Government of Indonesia. It is underpinned by a dataset that was constructed from SUSENAS (the National Socio-Economic Survey/ Survei Sosial Ekonomi Nasional) for 2018 which was made especially available for this purpose by Statistics Indonesia. The survey contains almost 300,000 households and 1.1 million individuals. As a result of recent enhancements that have been made to the EUROMOD software by the EUROMOD team, the software was able to accommodate such a large dataset without any difficulties.

The first training event for civil servants took place in Jakarta in July 2019, and the project is set to continue throughout 2020. INDOMOD will be updated to incorporate national tax and benefit policies for 2019 and 2020; a new SUSENAS dataset for 2019 will be prepared as an underpinning dataset; and the Government of Indonesia’s response packages to the Covid-19 pandemic will be simulated under various assumptions of its potential impact.

Although INDOMOD currently only simulates national tax and benefit policies, the relevant province-level tax and benefit policies will be added to the model during 2020 for five case study provinces: Aceh, Nusa Tenggara Barat, Sulawesi Selatan, Sumatera Selatan, and Yogyakarta. This last activity will involve close collaboration with stakeholders at the level of provincial government and so will raise awareness of INDOMOD across the country.

This new model marks an important addition to the suite of models internationally that make use of the EUROMOD software. Not only is Indonesia probably the largest country to use the EUROMOD software, with a population of 267 million people, but it also comprises around six thousand inhabited islands with a wide range of living standards and cultural diversity. INDOMOD is already being used to explore poverty reduction options that will support the wellbeing of children across Indonesia, and there is a strong commitment to ensure sustainability of the model.