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Automatic Fiscal Stabilizers In Sweden 1998-2009

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Executive Summary

In this paper, the author examines how the responsiveness of the Swedish public budget to business-cycle conditions has developed between 1998 and 2009. The author documents substantial changes in three components behind the budget elasticity: the average level of personal income taxes has fallen substantially, the progressivity of personal income taxation has increased, and spending on unemployment compensation has fallen. The first two changes have opposing effects on the budget elasticity, and the author finds that the higher progressivity has had a marginally larger impact on the elasticity than the tax cuts.

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