Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 346: SWEtaxben: A Swedish Tax/benefit Micro Simulation Model and an Evaluation of a Swedish Tax Reform.

Peter Ericson , Lennart Flood () and Roger Wahlberg
Additional contact information
Peter Ericson: Sim Solution, Postal: Högbergsgatan 50, , SE 118 26 Stockholm, , Sweden
Lennart Flood: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Roger Wahlberg: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

Abstract: The purpose of SWEtaxben is to evaluate the impact of changes in the tax/benefit systems on households as well as the central governmental budget. Relating to the micro simulation literature this model can be labeled a static micro simulation model with behavioral changes. This behavioral change takes two different forms and use two different types of models; first binary models that describe mobility in/out from non-work states such as old age pension, disability, unemployment, long term sickness and second models that describe change in working hours and welfare participation. Thus, apart from the choice to work or not to work, working hours conditional on working as well as welfare participation are treated as endogenous variables. As an application the model is used to evaluate the recent Swedish “make work pay” reform, effective from 2007 and further reinforced in 2008 and 2009. The key characteristic of this reform is an in-work tax credit and decreased state tax rate. Simulations performed by SWEtaxben show increased working hours at both the intensive as well as extensive margin. The tax decrease together with dynamic changes results in a strong increase in household’s incomes but also a reduction in income inequality. However, even considering the increase in hours of work, the reform is far from being self-financed.

Keywords: Micro simulation; tax-benefit system; reform

JEL-codes: D31; H24

50 pages, February 24, 2009

Full text files

19473 HTML file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Ann-Christin Räätäri Nyström ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2021-01-07 12:54:21.