SSE/EFI Working Paper Series in Economics and Finance
Automatic Fiscal Stabilizers in Sweden 1998-2009
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.
Keywords: Automatic stabilizers; budget elasticity; fiscal policy; stabilization policy; (follow links to similar papers)
JEL-Codes: E62; H30; H60; (follow links to similar papers)
17 pages, May 11, 2009
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