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Automatic Fiscal Stabilizers in Sweden 1998-2009

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Author Info

  • Floden, Martin

    () (Dept. of Economics, Stockholm School of Economics)

Abstract

In this note, I examine how the responsiveness of the Swedish public budget to business-cycle conditions has developed between 1998 and 2009. I document substantial changes in three components behind the budget elasticity: (i) the average level of personal income taxes has fallen substantially, (ii) the progressivity of personal income taxation has increased, and (iii) spending on unemployment compensation has fallen. The first two changes have opposing effects on the budget elasticity, and I find that the higher progressivity has had a marginally larger impact on the elasticity than the tax cuts. Also allowing for the lower unemployment compensations, the three effects add up to a small and non-substantial fall in the budget elasticity. Considering that most of the components behind the budget elasticity are imprecisely estimated, there is no clear evidence that the Swedish budget elasticity has changed during the last decade.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 719.

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Length: 17 pages
Date of creation: 11 May 2009
Date of revision:
Handle: RePEc:hhs:hastef:0719

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Related research

Keywords: Automatic stabilizers; budget elasticity; fiscal policy; stabilization policy;

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Cited by:
  1. Eric M. Leeper, 2009. "Anchoring Fiscal Expectations," Caepr Working Papers 2009-015, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.

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