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The Swedish Earned Income Tax Credit: Did It Increase Employment?

Author

Listed:
  • Karin Edmark
  • Che-Yuan Liang
  • Eva Mörk
  • Hakan Selin

Abstract

This paper analyzes the extensive-margin labor-supply effects of a Swedish earned income tax credit introduced in 2007. The reform was one of the government's flagship reforms to boost employment, but its actual effects have been widely debated. We exploit the fact that the size of the tax credit is a function of the municipality of residence and income if working, which yields two sources of quasi-experimental variation. The identifying variation, however, turns out to be small and potentially endogenous, which means that the question of whether the reform has delivered the hoped-for effects cannot be credibly answered.

Suggested Citation

  • Karin Edmark & Che-Yuan Liang & Eva Mörk & Hakan Selin, 2016. "The Swedish Earned Income Tax Credit: Did It Increase Employment?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 72(4), pages 475-503, December.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201612)72:4_475:tseitc_2.0.tx_2-a
    DOI: 10.1628/001522108X14764450192108
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    Citations

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    Cited by:

    1. Andrea Ichino & Martin Olsson & Barbara Petrongolo & Peter Skogman Thoursie, 2019. "Economic incentives, home production and gender identity norms," CEP Discussion Papers dp1626, Centre for Economic Performance, LSE.
    2. Ichino, Andrea & Olsson, Martin & Petrongolo, Barbara & Thoursie, Peter Skogman, 2019. "Economic incentives, childcare and gender identity norms," CEPR Discussion Papers 13769, C.E.P.R. Discussion Papers.
    3. Hu, Xiao & Liang, Che-Yuan, 2022. "Does income redistribution prevent residential segregation?," Journal of Economic Behavior & Organization, Elsevier, vol. 193(C), pages 519-542.
    4. Palviainen Heikki, 2021. "Incentivizing last-resort social assistance clients: Evidence from a Finnish policy experiment," Working Papers 2132, Tampere University, Faculty of Management and Business, Economics.
    5. Miao, Dingquan & Selin, Håkan & Söderström, Martin, 2022. "Earnings responses to even higher taxes," Working Paper Series 2022:12, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    6. Lundberg, Jacob, 2017. "Analyzing tax reforms using the Swedish Labour Income Microsimulation Model," Working Paper Series 2017:12, Uppsala University, Department of Economics.
    7. Heikki Palviainen, 2023. "Incentivizing last-resort social assistance clients: Evidence from a Finnish policy experiment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 1-19, February.
    8. Schock, Matthias Malte, 2019. "Steuerreformvorschläge des Mirrlees Committee und der Stiftung Marktwirtschaft [Tax Reform Proposals of the Mirrlees Committee and the Stiftung Marktwirtschaft]," MPRA Paper 96689, University Library of Munich, Germany.
    9. Forslund, Anders, 2019. "Employment outcomes and policies in Sweden during recent decades," Working Paper Series 2019:15, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    10. Laun, Lisa, 2017. "The effect of age-targeted tax credits on labor force participation of older workers," Journal of Public Economics, Elsevier, vol. 152(C), pages 102-118.
    11. Laun, Lisa, 2019. "In-work benefits across Europe," Working Paper Series 2019:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    12. Palviainen, Heikki, 2019. "Changing Nordic model? A policy analysis," EUROMOD Working Papers EM15/19, EUROMOD at the Institute for Social and Economic Research.
    13. Nyman, Pär & Aggeborn, Linuz & Ahlskog, Rafael, 2023. "Filling in the blanks: How does information about the Swedish EITC affect labour supply?," Labour Economics, Elsevier, vol. 85(C).
    14. Berry, Carl & Börjesson, Maria, 2024. "Income and fuel price elasticities of car use on micro panel data," Energy Economics, Elsevier, vol. 135(C).
    15. Lundberg, Jacob & Norell, John, 2018. "Taxes, benefits and labour force participation: A survey of the quasi-experimental literature," Ratio Working Papers 313, The Ratio Institute.

    More about this item

    Keywords

    labor supply; labor-force participation; tax incentives;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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