1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Some Issues Related to the Equity-Efficiency Trade-Off in the Swedish Tax and Transfer System

The Swedish universal welfare model relies on a high tax level to finance a variety of transfers to the workingage population both in the form of income replacements and income supplements and as services for health-, child- and elderly care. The available evidence, reviewed in this Working Paper, indicates that the system has powerful redistributive properties. However, the efficiency costs of the system are substantial. Taxes and benefits combine to face income earners with high effective tax rates and the unemployed with little reward from moving into employment, resulting in a declining intensity in the utilisation of labour. A complex tax code arising out of a significant difference in tax rates for labour and capital income impedes the establishment and expansion of enterprises. An internationally-high taxation of capital income acts as an impediment to savings and the development of the domestic market for risk capital. To these domestic distortions has to be added the ...

English

Keywords: Sweden, taxes, redistribution, transfers
JEL: H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions; H30: Public Economics / Fiscal Policies and Behavior of Economic Agents / Fiscal Policies and Behavior of Economic Agents: General; H23: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies; H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes; H21: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Efficiency; Optimal Taxation
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