The Effects of Tax Wedges on Hours Worked and Unemployment in Sweden

The paper investigates the relationship between labor taxation and unemployment in Sweden by estimating a labor market model that includes a wage-setting locus and labor demand and supply relationships. The study simulates the effect of a 1 percentage point increase in the payroll tax and in total t...

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Bibliographic Details
Main Author: Thomas, Alun
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1998
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a The Effects of Tax Wedges on Hours Worked and Unemployment in Sweden  |c Alun Thomas 
260 |a Washington, D.C.  |b International Monetary Fund  |c 1998 
300 |a 25 pages 
651 4 |a Sweden 
653 |a Taxation 
653 |a Labor 
653 |a Welfare & benefit systems 
653 |a Taxes 
653 |a Labor market 
653 |a Real wages 
653 |a Payroll tax 
653 |a Demand and Supply of Labor: General 
653 |a Income tax 
653 |a Labor markets 
653 |a Labour 
653 |a Wages, Compensation, and Labor Costs: General 
653 |a Income economics 
653 |a Personal Income and Other Nonbusiness Taxes and Subsidies 
653 |a Fiscal policy 
653 |a Public finance & taxation 
653 |a Labor taxes 
653 |a Wages 
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520 |a The paper investigates the relationship between labor taxation and unemployment in Sweden by estimating a labor market model that includes a wage-setting locus and labor demand and supply relationships. The study simulates the effect of a 1 percentage point increase in the payroll tax and in total tax rates. The increase in the payroll tax pushes up labor costs by about ½ percent over a 5-10 year time horizon. Hours worked fall by 0.5 percent and the unemployment rate rises by 0.3 percentage point. The increase in total tax rates generates a similar result. Therefore, it appears that increases in taxes have adversely affected employment and unemployment in Sweden