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| Author: | Jonsson, M. Klein, P. |
| Title: | Tax distortions in Sweden and the United States |
| Journal: | European Economic Review
2003 : AUG, VOL. 47:4, p. 711-729 |
| Index terms: | Taxation Welfare Costs Sweden Nordic countries Scandinavia Europe USA |
| Language: | eng |
| Abstract: | This paper calculates the welfare costs of distortionary taxation (incl. inflation) in models calibrated for the United States (U.S.) and Sweden. The welfare costs are calculated using comparative steady state as well as dynamic analysis, taking the costs of transition from the distorted to the optimal steady state into account. The welfare costs of adding stochastic fluctuations are also calculated. This paper's main finding is that the total welfare costs of the distortionary taxes incl. 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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