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Automatic Fiscal Stabilizers in Sweden 1998-2009

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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.

Suggested Citation

  • Floden, Martin, 2009. "Automatic Fiscal Stabilizers in Sweden 1998-2009," SSE/EFI Working Paper Series in Economics and Finance 719, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0719
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    File URL: http://swopec.hhs.se/hastef/papers/hastef0719.pdf
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    Cited by:

    1. Eric M. Leeper, 2009. "Anchoring fiscal expectations," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 72, pages 17-42, September.

    More about this item

    Keywords

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

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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