A Microsimulation Approach to an Optimal Swedish Income Tax

Peter Ericson () and Lennart Flood
Additional contact information
Peter Ericson: Empirica, Högbergsgatan 50, SE 118 26 Stockholm, Sweden

International Journal of Microsimulation, 2012, vol. 2, issue 5, 2-21

Abstract: The purpose of this paper is to identify a Swedish tax/benefit design that maximizes social welfare. A two stage process is proposed where individuals preferred choice of leisure and consumption is solved in the first stage, and the second stage identifies the tax/benefit system that maximizes the social welfare function. The study deviates from the mainstream literature as the first stage is based on a micro simulation model with estimated behavioural responses. We estimate a structural model for a sample of workers or voluntary non-workers that describes heterogeneity in consumption-leisure preferences for different household types. Models that describe the participation decision for the unemployed as well as individuals outside the labour force are also included. The results suggest that increased housing allowance, basic deduction, and in-work tax credit in combination with a reduction of the progressive national taxes would increase welfare.

Keywords: Micro simulation; tax-benefit system; in-work tax credit reform; optimal taxation. (search for similar items in EconPapers)
JEL-codes: C8 D31 H24 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.microsimulation.org/IJM/V5_2/1_IJM_5_2_Ericson_Flood.pdf (application/pdf)

Related works:
Working Paper: A Microsimulation Approach to an Optimal Swedish Income Tax (2009)
Working Paper: A Microsimulation Approach to an Optimal Swedish Income Tax (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijm:journl:v:5:y:2012:i:2:p:2-21

Access Statistics for this article

International Journal of Microsimulation is currently edited by Matteo Richiardi

More articles in International Journal of Microsimulation from International Microsimulation Association
Bibliographic data for series maintained by Jinjing Li ().