Advanced Search
MyIDEAS: Login to save this article or follow this journal

A Microsimulation Approach to an Optimal Swedish Income Tax

Contents:

Author Info

  • Peter Ericson

    ()
    (Empirica, Högbergsgatan 50, SE 118 26 Stockholm, Sweden)

  • Lennart Flood

    (School of Business, Economics and Law, University of Gothenburg, Department of Economics)

Abstract

The purpose of this paper is to identify a Swedish tax/benefit design that maximizes social welfare. A two stage process is proposed where individuals’ preferred choice of leisure and consumption is solved in the first stage, and the second stage identifies the tax/benefit system that maximizes the social welfare function. The study deviates from the mainstream literature as the first stage is based on a micro simulation model with estimated behavioural responses. We estimate a structural model for a sample of workers or voluntary non-workers that describes heterogeneity in consumption-leisure preferences for different household types. Models that describe the participation decision for the unemployed as well as individuals outside the labour force are also included. The results suggest that increased housing allowance, basic deduction, and in-work tax credit in combination with a reduction of the progressive national taxes would increase welfare.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.microsimulation.org/IJM/V5_2/1_IJM_5_2_Ericson_Flood.pdf
Download Restriction: no

Bibliographic Info

Article provided by Interational Microsimulation Association in its journal International Journal of Microsimulation.

Volume (Year): 2 (2012)
Issue (Month): 5 ()
Pages: 2-21

as in new window
Handle: RePEc:ijm:journl:v:5:y:2012:i:2:p:2-21

Contact details of provider:
Web page: http://ima.natsem.canberra.edu.au/index.htm

Related research

Keywords: Micro simulation; tax-benefit system; in-work tax credit reform; optimal taxation.;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. François Bourguignon & Amedeo Spadaro, 2006. "Microsimulation as a Tool for Evaluating Redistribution Policies," Working Papers 20, ECINEQ, Society for the Study of Economic Inequality.
  2. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  3. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
  4. Flood, Lennart & Pylkkänen, Elina & Wahlberg, Roger, 2003. "From Welfare to Work: Evaluating a Proposed Tax and Benefit Reform Targeted at Single Mothers in Sweden," Working Papers in Economics 107, University of Gothenburg, Department of Economics.
  5. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August.
  6. Ericson, Peter & Flood, Lennart & Wahlberg, Roger, 2009. "SWEtaxben: A Swedish Tax/benefit Micro Simulation Model and an Evaluation of a Swedish Tax Reform," Working Papers in Economics 346, University of Gothenburg, Department of Economics.
  7. Vermeulen, F.M.P., 2002. "Collective household models: Principles and main results," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3106943, Tilburg University.
  8. Rolf Aaberge, 2000. "Characterizations of Lorenz curves and income distributions," Social Choice and Welfare, Springer, vol. 17(4), pages 639-653.
  9. Richard Blundell & Andrew Shephard, 2011. "Employment, Hours of Work and the Optimal Taxation of Low Income Families," Working Papers 1307, Princeton University, Department of Economics, Center for Economic Policy Studies..
  10. Flood, Lennart & Hansen, Jörgen & Wahlberg, Roger, 2003. "Household Labor Supply and Welfare Participation in Sweden," IZA Discussion Papers 769, Institute for the Study of Labor (IZA).
  11. Aaberge, Rolf & Flood, Lennart, 2008. "Evaluation of an In-Work Tax Credit Reform in Sweden: Effects on Labor Supply and Welfare Participation of Single Mothers," IZA Discussion Papers 3736, Institute for the Study of Labor (IZA).
  12. repec:oup:restud:v:78:y::i:4:p:1490-1518 is not listed on IDEAS
  13. Joel Slemrod, 1989. "Optimal Taxation and Optimal Tax Systems," NBER Working Papers 3038, National Bureau of Economic Research, Inc.
  14. Jeffrey M. Wooldridge, 2005. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(1), pages 39-54.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Tim Goedemé & Karel Van den Bosch & Lina Salanauskaite & Gerlinde Verbist, 2013. "Testing the Statistical Significance of Microsimulation Results: A Plea," International Journal of Microsimulation, Interational Microsimulation Association, vol. 6(3), pages 50-77.
  2. Laun, Lisa, 2012. "The effect of age-targeted tax credits on retirement behavior," Working Paper Series 2012:18, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  3. repec:ese:emodwp:em18-13 is not listed on IDEAS
  4. John Creedy & Nicolas Hérault†, 2011. "Decomposing Inequality and Social Welfare Changes : The Use of Alternative Welfare Metrics," Department of Economics - Working Papers Series 1121, The University of Melbourne.
  5. Olivier Bargain & André Decoster & Mathias Dolls & Dirk Neumann & Andreas Peichl & Sebastian Siegloch, 2013. "Welfare, labor supply and heterogeneous preferences: evidence for Europe and the US," Social Choice and Welfare, Springer, vol. 41(4), pages 789-817, October.
  6. Boeters, Stefan, 2010. "Optimal tax progressivity in unionised labour markets: Simulation results for Germany," ZEW Discussion Papers 10-035, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  7. John Creedy, 2013. "Alternative Distributions for Inequality and Poverty Comparisons," Treasury Working Paper Series 13/11, New Zealand Treasury.
  8. repec:ese:emodwp:em5-11 is not listed on IDEAS
  9. Tim Goedemé & Karel Van den Bosch & Lina Salanauskaite & Gerlinde Verbist, 2013. "Testing the Statistical Significance of Microsimulation Results: Often Easier than You Think. A Technical Note," ImPRovE Working Papers 13/10, Herman Deleeck Centre for Social Policy, University of Antwerp.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ijm:journl:v:5:y:2012:i:2:p:2-21. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gijs Dekkers).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.