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Tax reform evaluation using non-parametric methods: Sweden 1980-1991

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  • Blomquist, Soren
  • Eklof, Matias
  • Newey, Whitney

Abstract

This paper evaluates the tax reforms carried out in Sweden between 1980 and 1991. We use a recently developed nonparametric labor supply function to account for the behavioral responses of the taxed individuals. We decompose the tax reform to study how the separate components influence hours of work, tax revenues and income distribution. The results indicate that the reform was underfinanced and that the increased indirect taxation and redesigned transfer system almost eliminated the positive effects on hours of work due to the decreased marginal taxes on labor income.
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  • Blomquist, Soren & Eklof, Matias & Newey, Whitney, 2001. "Tax reform evaluation using non-parametric methods: Sweden 1980-1991," Journal of Public Economics, Elsevier, vol. 79(3), pages 543-568, March.
    • Handle: RePEc:eee:pubeco:v:79:y:2001:i:3:p:543-568
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    1. Richard Blundell & Alan Duncan & Costas Meghir, 1998. "Estimating Labor Supply Responses Using Tax Reforms," Econometrica, Econometric Society, vol. 66(4), pages 827-862, July.
    2. N. S. Blomquist & U. Hansson-Brusewitz, 1990. "The Effect of Taxes on Male and Female Labor Supply in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 317-357.
    3. Agell, Jonas & Englund, Peter & Sodersten, Jan, 1996. "Tax Reform of the Century -- the Swedish Experiment," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(4), pages 643-664, December.
    4. Agell, S.A. & Meghir, C., 1995. "Male Labour Supply in Sweden : Are Incentives Important?," Papers 12, Uppsala - Working Paper Series.
    5. Hausman, Jerry A & Newey, Whitney K, 1995. "Nonparametric Estimation of Exact Consumers Surplus and Deadweight Loss," Econometrica, Econometric Society, vol. 63(6), pages 1445-1476, November.
    6. Thomas Aronsson & Mårten Palme, 1998. "A Decade of Tax and Benefit Reforms in Sweden: Effects on Labour Supply, Welfare and Inequality," Economica, London School of Economics and Political Science, vol. 65(257), pages 39-67, February.
    7. Blomquist, N. Soren, 1983. "The effect of income taxation on the labor supply of married men in Sweden," Journal of Public Economics, Elsevier, vol. 22(2), pages 169-197, November.
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    Cited by:

    1. Bessho, Shun-ichiro & Hayashi, Masayoshi, 2011. "Labor supply response and preferences specification: Estimates for prime-age males in Japan," Journal of Asian Economics, Elsevier, vol. 22(5), pages 398-411, October.
    2. Jukka Pirttilä & Håkan Selin, 2011. "Tax Policy and Employment: How Does the Swedish System Fare," Working Papers 267, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.
    3. Blomquist, Sören & Selin, Håkan, 2010. "Hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 878-889, December.
    4. Liang, Che-Yuan, 2012. "Nonparametric structural estimation of labor supply in the presence of censoring," Journal of Public Economics, Elsevier, vol. 96(1), pages 89-103.
    5. Michael P. Keane, 2011. "Labor Supply and Taxes: A Survey," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 961-1075, December.
    6. Anil Kumar, 2012. "Nonparametric estimation of the impact of taxes on female labor supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(3), pages 415-439, April.
    7. Olmstead, Sheila M. & Hanemann, W. Michael & Stavins, Robert N., 2005. "Do Consumers React to the Shape of Supply? Water Demand under Heterogeneous Price Structures," Discussion Papers 10672, Resources for the Future.
    8. Pia Rattenhuber, 2012. "Marginal Taxes: A Good or a Bad for Wages?: The Incidence of the Structure of Income and Labor Taxes on Wages," Discussion Papers of DIW Berlin 1193, DIW Berlin, German Institute for Economic Research.
    9. Fang, Hongsheng & Bao, Yuxin & Zhang, Jun, 2017. "Asymmetric reform bonus: The impact of VAT pilot expansion on China's corporate total tax burden," China Economic Review, Elsevier, vol. 46(S), pages 17-34.
    10. Carneiro, Fernando Moraes & Turnovsky, Stephen J. & Tourinho, Octavio Augusto Fontes, 2022. "Economic growth and inequality tradeoffs under progressive taxation," Journal of Economic Dynamics and Control, Elsevier, vol. 143(C).
    11. Thomas Aronsson & James R. Walker, 2010. "Labor Supply, Tax Base and Public Policy in Sweden," NBER Chapters, in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 127-158, National Bureau of Economic Research, Inc.
    12. Shun-ichiro Bessho & Masayoshi Hayashi, 2013. "Estimating the Social Marginal Cost of Public Funds," Public Finance Review, , vol. 41(3), pages 360-385, May.
    13. Kumar, Anil, 2008. "Labor supply, deadweight loss and tax reform act of 1986: A nonparametric evaluation using panel data," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 236-253, February.

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    More about this item

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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