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Tax distortions in Sweden and the United States

Record type: Article

We calculate the welfare costs of distortionary taxation (including inflation) in models calibrated for the United States and Sweden. The welfare costs are calculated using comparative steady state as well as dynamic analysis, where we take the costs of transition from the distorted to the optimal steady state into account. We also calculate the welfare costs of adding stochastic fluctuations. Our main finding is that the total welfare costs of the distortionary taxes including the distortionary effects of inflation are about five times higher in Sweden than in the United States. Meanwhile, stochastic fluctuations in policy turn out to have a relatively small impact on welfare.

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Citation

Klein, Paul and Jonsson, Magnus (2003) Tax distortions in Sweden and the United States European Economic Review, 47, (4), pp. 711-729. (doi:10.1016/S0014-2921(02)00288-X).

More information

Published date: August 2003
Keywords: stochastic distortionary taxation, welfare costs

Identifiers

Local EPrints ID: 188417
URI: http://eprints.soton.ac.uk/id/eprint/188417
ISSN: 0014-2921
PURE UUID: dcad3acb-55ec-4a36-8c45-db999761a987

Catalogue record

Date deposited: 03 Jun 2011 10:57
Last modified: 18 Jul 2017 11:42

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Contributors

Author: Paul Klein
Author: Magnus Jonsson

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