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Tax Policy and Employment: How Does the Swedish System Fare?

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  • Pirttälä, Jukka

    ()
    (University of Tampere and the Labour Institute for Economic Research)

  • Selin, Håkan

    (Uppsala Center for Fiscal Studies)

Abstract

This paper reviews the literature on optimal taxation of labour income and the empirical work on labour supply and the elasticity of taxable income in Sweden. It also presents an overview of Swedish taxation of labour income, offers calculations on the development in effective marginal tax rates and participation tax rates, and estimates, using the difference-in-differences method, the impact of tax incentives on employment rates of elderly workers. After this background, we ponder possibilities for reforming the Swedish tax system to improve its labour market impacts. We suggest better targeting the earned income tax credit at families and low-income workers, lowering the top marginal tax rates, and maintaining the tax incentives for older workers.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Fiscal Studies with number 2011:2.

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Length: 73 pages
Date of creation: 01 Feb 2011
Date of revision:
Handle: RePEc:hhs:uufswp:2011_002

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Keywords: Optimal taxation; labour income taxation; labour supply; taxable income; Swedish tax system.;

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References

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  1. 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," Working Papers in Economics 319, University of Gothenburg, Department of Economics.
  2. Jukka Pirttilä & Håkan Selin, 2011. "Income Shifting within a Dual Income Tax System: Evidence from the Finnish Tax Reform of 1993," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 120-144, 03.
  3. Liang, Che-Yuan, 2009. "Nonparametric Structural Estimation of Labor Supply in the Presence of Censoring," Working Paper Series 2009:8, Uppsala University, Department of Economics.
  4. Jukka Pirttilä & Ilpo Suoniemi, 2010. "Public Provision, Commodity Demand and Hours of Work: An Empirical Analysis," CESifo Working Paper Series 3000, CESifo Group Munich.
  5. Ossi Korkeamäki & Roope Uusitalo, 2009. "Employment and wage effects of a payroll-tax cut—evidence from a regional experiment," International Tax and Public Finance, Springer, vol. 16(6), pages 753-772, December.
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Cited by:
  1. Charlotte Bartels, 2013. "Long-Term Participation Tax Rates," SOEPpapers on Multidisciplinary Panel Data Research 609, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Spencer Bastani & Håkan Selin, 2012. "Bunching and Non-Bunching at Kink Points of the Swedish Tax Schedule," CESifo Working Paper Series 3865, CESifo Group Munich.
  3. 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.

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