How can Scandinavians tax so much?

Henrik Jacobsen Kleven has a new JEP piece on that question., here is one short excerpt:

…these countries also spend relatively large amounts on the public provision and subsidization of goods that are complementary to working, including child care, elderly care, and transportation. Such policies represent subsidies to the costs of market work, which encourage labor supply and make taxes less distortionary…Furthermore, Scandinavian countries spend heavily on education, which is complementary to long-run labor supply and potentially offsets some of the distortionary effects of taxation…

The paper makes numerous other good points.

By Besley and Persson, here is a related JEP piece on why developing economies tax so little.  And here is a recent piece on whether Sweden can become a fully cashless society.  By the way, the full issue of JEP is here.


I hope this myth of high Scandinavian taxation will die one day. For a wage worker, the total tax wedge is remarkably consistent across the developed world: 30 - 50% everywhere, save a few outliers (1). For a corporation, Scandinavian corporate tax rates are also average, compared to other developed countries.


My understanding is that above the line SS contributions are much higher in Europe (25% for instance vs 6.2% in US). These don't get counted as a 'tax'. They're substantially progressive in the US in that the increase in benefits to the marginally taxed dollar is quite small at the top end of the range, so it's just a tax, not a tax with offsetting benefit. Maybe they aren't elsewhere, but I would be surprised if this were true. A lot of times these are excluded from the quoted 'tax burden'.

"SS contributions are much higher in Europe (25% for instance vs 6.2% in US)."

It doesn't change your point, but SS contributions in the US are 12.4%. Remember the government hides half of it by making the "employer" pay it, who then naturally will pay less money than otherwise. It's pretty obvious in my line of work as contractors at the same grade all make an extra amount of money to cover the "employer contribution" and then turn around and remit it to the IRS.

I wouldn't label SS taxes as "progressive" given that they cap out after a point, leaving all wage income over some amount (I think it was like $80K ~10 years ago and I have no idea where it's at now.) untaxed. But yeah. I'd be more inclined to label it regressive than the other way.

He's saying they are progressive because the benefit falls off relative to contributions very rapidly. I.e., if you make $30k per year, it hardly seems fair to call SS a tax since you eventually get so much back, but if you make $95k per year it most definitely is a tax because you get very little back relative to what you put in.

He's got a point, but it's a bit of a stretch because declining benefit is not normally what people mean when they say a tax is progressive. If I'm a high earner I get a declining benefit from defense spending per dollar as I pay more and more taxes. I can only be defended once and defense spending is pretty much proportional to population. But I don't call my income taxes progressive for that reason. Other reasons, sure, but not that reason.

Indeed, and taxation rates become even more similar when measured as all kinds and levels of taxation as a percentage of GDP. And after that, the remaining differences are mostly explained by private vs public health insurance and paid public versus unpaid public higher education.

But Tyler comes from a culture in which there's always an elder male assigned to the role of warning children of the misery of Scandinavia, so get used to it.


When I lived in Sweden, my tax rate was lower than it was when I lived in NYC.

>I hope this myth of high Scandinavian taxation will die one day.

Useful myths never die. For some, the twin myths of "Sweden has massive taxes" and "Sweden is a utopia" are too good to check. They are very handy when selling the idea that higher taxes will make the US a utopia.

This is why global warming mythology isn't going away, either.

I have a number of Canadian acquaintances, and after telling you how Canada is the land of social democratic milk and honey, they will acknowledge that prices are higher, taxes are the same or higher, salaries are the same (or lower), there are plenty of restrictions and excluded services with their public plans, and they pay for supplemental medical coverage as well. Oh, and thanks for the cheap drugs.

It's also interesting that all these welfare-state utopias have cratering TFR's and must resort to immigration to shore up their tax bases.

I've got a friend who's a Canadian pathologist who has also worked in the US. He says Canada is much more exciting because by the time you get cancer biopsies there, the patient is usually pretty far gone, while in the US eighty percent of them are going to be fine.

Does that fall into the category of "too good to check"? Actually, most of the studies do find lower cancer mortality rates in the U.S., but the disparity is a couple orders of magnitude lower than that anecdote suggests. Data!

That'd be interesting if it were true. The Nordic countries and France have the highest fertility rates in Western Europe, close to replacement level. It's the less generous and more socially traditional countries of the Mediterranean and Eastern Europe, as well as Japan, that have cratered TFR.

@AlanW: "Does that fall into the category of “too good to check”? Actually, most of the studies do find lower cancer mortality rates in the U.S., but the disparity is a couple orders of magnitude lower than that anecdote suggests. Data!"

I saw a table once of cancer five year survival rates or such by gender. For women the US was in the lead, but not by much. For men the US was far in the lead -- I think Sweden second, heh. But AIUI, this is largely because the US is aggressive about detecting prostate cancer -- a form of cancer one rarely dies from anyway, as most are slow growing so you die of something else first. So it's basically inflating the numbers, with of course a sizable profit for the doctors involved.

Survival rates do not really tell us anything about superior treatment or technology anyway. They tell us about early diagnosis and maybe more aggressive prolongation of the inevitable. Left out of the stat is whether the patient actually overcomes the cancer and dies many years later of something unrelated-- or whether they succumb too. The former case would be reason to cheer, the latter not so much.

For that matter, AFAICT "Taxachusetts" is based on a few years of relatively high taxes in the early 1980s. As a %age of GDP taken as taxes, MA is resolutely average, last I checked.

One of the biggest problems with GDP is that outsourcing household production to the market - from cleaning services to nursing homes - raises GDP, even though incentives are often poorly aligned for good performance and indeed some valuable aspects of these services are illegible and irreplaceable.

Or put it another way: sending your baby to be raised by strangers is a boost to GDP, as is sending forgetful Grandma to be cared for by bored box-checkers. That all this frees you up to spend 70-90% of your time at work with strangers, away from family, is a bonus.

Well of course I family time does reduce economic output and should be discouraged in any proper free market society. Goods and services should be supplies by market actors collecting market incomes.

Has anyone ever tried to calculate GDP adjusted for non-market labor?

This reminds me of how you have to adjust CO2 emissions for the fact that a lot of countries have effectively outsourced their carbon-intensive industries to places like China. So a country like France that officially has 5-ish tonnes of CO2 emissions per capita per year, effectively account for 8-ish tonnes. Meanwhile China at 7-ish tonnes is really only accounting for 6-ish tonnes, because they're making stuff to send over to places like France. Here is a link with some charts for that:


Especially because there is so much less dead-weight loss when you avoid taxation and regulation by working in the home.

People being indifferent between being having a SAHM spouse and having a career spouse paid in the six figures should be a strong indication that something is wrong with GDP measures.

Right, paying yourself $10 per hour to stay at home taking care of a family member means you can spend the full $10 paying the electric bill, mortgage, food bill, medical bills, rent without paying any taxes.

The problem is drawing those $10 bills to pay yourself is the crime of counterfeiting. But at least that gets you out of the home and makes someone else pay for your food, electricity, rent.

I'm not sure I understand the point you're making.

When my wife worked, half her income went to the government, which is to say it pretty much evaporated from a social welfare point of view. Now the economy gets 100 percent of her productivity. Also, she gets to make rational decisions without needing to worry as much about compliance or litigation threats or anything like that.

I understand there were some positive externalities associated with her working outside the home, but they face a massive loss threshold they needed to overcome for the GDP accounting to make sense.

The problem for GDP is that when a person's labor is volunteer or within the home, it's not denominated in dollars and is therefore hard to measure. So for GDP, we just assume it's zero, which is a monumental error.

Taking a stay-at-home-parent and putting them in the working world while outsourcing childcare hurts economic output unless the parent is extremely well compensated for their labor. But GDP misses this.

Agree, I think there should be some sort of "sanity check" applied with basic, objective measurements of living standards. I'd include per capita living space area, kilowatts of electricity, pounds of meat, motor vehicles per person, miles of air travel, number of jeans in a closet, movies seen per year, percent of homes with air conditioning, in unit washer/dryer, size of refrigerator, etc.

My guess is that applying these metrics you'd find two very clear conclusions: 1) American and Australian living standards are much higher than Western European based on what you'd expect from GDP. 2) Unlike what real incomes would suggest, median workers in America have had surging living standards since 1980. From there economists need to figure out why GDP is mismatching more objective living standard metrics.

I would guess that most homes in Scandinavia do not have air conditioning, given the climate.

That's not the point of the exercise. It's to prove that Americans consume more and thus must be happier.

Tom, There is much research on happiness levels by country. The Scandinavian countries ranked the highest in happiness. See my comment below.

Who said anything about happiness. The object of GDP is to measure material wealth. A society may be rich along many other dimensions, but that's not what GDP purports to measure. I'm pretty sure that I have a more fulfilling, healthier and better balanced life than Charlie Sheen, but without a doubt he's much wealthier than me. I made the claim that GDP rankings across time and space probably don't measure up to objective measurements of material wealth. You counterpointed that there's more to life than material wealth. Which may be all well and good, but it doesn't address my point that GDP measurements seem broken for their *stated objective*. It's like if I designed a licensing exam for doctors, but people with no knowledge of medicine keep passing. I say the exam seems poorly designed, then you retort "well those people who passed had a pretty good knowledge of physics and history."

And I'm not saying that they wouldn't, which is why I think you need a broad set of metrics of material wealth. But my point still stands, I believe that Northern European economies, which supposedly have the same level of material wealth as America and Australia, probably have lower objective measurements across nearly every metric. Put another way, GDP indicates that Scandinavians and Americans have the same level of material wealth. But a lot more Americans have A/C than Scandinavians. All well and good, that makes sense. But with those savings Scandinavians should be able to buy more of something else.

This gets back to what I'm my broad metric set. You can say, well maybe Europeans have a cultural preference for smaller homes, more walkable cities where they don't need cars, and less meat and protein. Fine, but according to GDP metrics they're producing the same amount of overall economic output as Americans. So they build smaller homes, fewer cars and raise less meat. But what they heck do they do to make up for that?! If they make overall the same amount of stuff, but fewer of A, then they have to make more of B. What is B?! Because I see a lot of ways that Northern European appear materially poorer than median Americans, but few to little metrics that they appear wealthier along.

That's an interesting question. My guess would be (and that's just as anecdotally as yours) that at least a part of it could be explained by looking at differences in quality. Americans tend to favor bigger (bigger car, bigger house, ...) and Europeans tend to be more obsessed with quality (better cars, better food, ...). And I don't mean that as a value judgement.

Finns have something like 1.2 saunas per person. There's at least some of your B. They generally have a summer house by a lake as well as their city dwelling, there's some more.

Could you at least stop talking about A/C in relation to the Nordic countries? No one has A/C there, but not because they can't afford it but instead because it's friggin' cold and an A/C would be completely useless.

Would you consider it a sign of poverty that no one in Arizona has triple glass windows? That is standard in the Nordics, and the lack of it in Arizona could only indicate poverty, right?

Also, for a partial answer to "B", the Tesla S is the most sold car model in Norway this year. Think about that one for a while...

Yeah but Norway is a petrostate. Not sure if their Tesla habits are that instructive.

Standard of living would also include vacation/leisure time, and years of healthy life expectancy. Neither of these will favor the US, and the US has been falling behind on the latter. Harder to measure, but I'd count stress and fear as part of quality of life too, and it makes sense that countries where "how will I pay for my medical bills or child's education" are non-issues will have lower stress levels.

There's also the nominal/PPP income differences. An mean Swede is at least as powerful as a mean American when it comes to imports, and the median Swede is probably even better, thanks to lower inequality. PPP is lower, but that's largely local expenses like rent and services. I suspect there's a tradeoff: a lack of cheap labor makes goods more expensive, but OTOH no one has to *be* the cheap labor. The US is a great place to be rich, but this ignores the plight of those providing the cheap labor.


If you really want to be accurate about this, you need to allow for declining marginal utility of consumption. Is a 6000 sq. ft. house really twice as good as a 3000 sq. ft. house?

And you probably should use medians, not means.

Who knows what you would learn?

I honestly don't know how this argument is supposed to work. If childcare is provided by the state regardless of my income, that's just a thing that I get. I don't really see how elderly care or transportation are much different. If my marginal wage is taxed at 40%, the childcare doesn't offset this at the margin, only gross. If it's not worth my time to work a little harder for 60% of my pre-tax earning power, why not take the time for myself and take advantage of the free child care? There are very few parents who wouldn't appreciate a little more time to themselves than what they get. At Marginal Revolution I would expect this difference between the gross and marginal impact to be noticed and appreciated!

My cartoonish picture of Sweden is of a lady driving to the state-run day care to drop her kids off for the day so she can drive to the next state-run day care down the road for her job taking care of the children of the ladies taking care of her children.


you realize that your numbers don't add up do you?


I've heard this kind of thinking before, and it struck me immediately with a sense of truth to it.

Then, 15 seconds later, I thought about it some more...

* comparative advantage - daycare workers are also looking after the kids of people (like my wife) who make 6 figures. It's a better division of labour based on skills. The world benefits more from my wife being in the working world, and she would lose both a good income and a sense of place in the world if she was at home looking after the kids.
* economies of scale - where I live, the regulations are that 1 caregiver can look after 2.5 infants (and the ratios get higher as the kids get older), so (apart from the particularly fecund) more parents (usually woman) are freed up for other work
* capital investment - day cares are equipped for optimum child play and learning. I couldn't possibly deck my house out with the gear that they've got at a day care.
* quality of care - day care workers are trained and supported to give kids good experiences. My wife and I are both professional overachievers who understand how to work long weeks much better than I understand how to engage and play with kids.
* kids enjoy playing together -- you should have seen my son's eyes light up when, at 8 months of age, I brought him to a daycare so we could interview them. He was on the cusp of having baby-friends!

These are the positives, at least according to my observations here in Soviet Kanuckistan. (Swedish enough?) There are negatives too. I've thought about those as well. But put the cartoon aside. The real world doesn't work that way, anywhere.

In the real world, nations with generous welfare policies are going extinct.

"In the real world, nations with generous welfare policies are going extinct."

Hmm, it would be interesting to see a graph of % of GDP spent on welfare policies versus population replacement rate.

I see the correlation. I'm not convinced that there is causality. My impression is that the underlier for both is 'wealth'. 'Female emancipation' is tied in there too, but I think the relationship between wealth and female emancipation is more complex; probably a feedback loop. (Japan would be an interesting counterexample, perhaps.)

Maintaining population levels without immigration seems to require, holding other (Western) social factors constant, a subordinated caste of domestic workers / child-rearers (commonly known as "housewives"), without economic agency or alternative means for self-actualization. (Not that child-rearing was a guaranteed means to self-actualization in the first place; c.f. "The Feminine Mystique." I know people, mothers of friends of mine, who could have been case studies for that book.) Remove those restrictions and you get a distribution of results - some woman find it intrinsically compelling and opt for it, some do the "working mother" thing (but maybe only with one kid), and some go child-free. It averages out to below replacement levels.

I'm not trying to make value judgments here, just observations. To the degree this is a problem I think there could be many possible solutions, and not all of them are "shove women back in their boxes." Failing that option, other aspects of our current social organization would have to change quite a lot. (A few that come to mind: Role of the state in natalism, preeminence of capitalism and private property, corporatism, stance on immigration, attitudes of men towards domestic work and child-rearing. No doubt there are more.) Many some of these are free parameters, maybe some are attractor states. I've heard arguments both ways.

Or maybe the Duggars outbreed everyone and their social attitutes run true through the generations, and the non-patriarchal variant of Western liberalism is a historical blip.

Fertility levels are non-dysgenic for the religious and moral traditionalists. High IQ conservative churchgoers are having the same number of kids as the low IQ. They replace themselves.

By contrast, fertility is strongly dysgenic amongst the irreligious and progressive (progressive religious denominations behave much like not going to church in this case). Smart progressive people have terrible fertility.

It's not IQ that is negatively correlated with fertility, but the combination of IQ and progressivism.

If we could shut down immigration within a few generations smart IQ progressives would die off, and the elite would be more conservative and have replacement fertility. That's one reason why dysgenics isn't a world ending problem, but it all rests on keeping immigrants from crowding out that process.

Maybe in some alternate reality. Not in this one.


Politics is not hereditary (religiosity in the very general sense, not specific religion adherence, may have an inheritable component). New progressives emerge from conservative families regularly, and the reverse also happens: liberal parents sometimes have non-liberal children. If this were not the case political change would be all but impossible and government systems would have ossified millennia ago at the stage of Sumerian priest-kings, Egyptian pharaohs and Chinese Sons of Heaven.

Nations with generous welfare policies include the Scandinavians, Germany, Austria, Switzerland, and the BeNeLux.

Less generous policies are found in Italy, Greece, Spain, Portugal, the USA and the UK.

Which populations appear to be stressed would you say?

For this to work you have to believe:

1) That the day care workers are "trained and supported to give kids good experiences" rather then disengaged immigrant woman who will never provide the same level of care and love that a mother would as a SAHM. The children are clearly being raised worse to support adults preferences, everyone knows it, and that's why no matter how many rationalizations you through at it every women feels intrinsically guilty about the situation (this isn't a social construct, its an objective fact that eats away at their souls).

2) That the corporate jobs most woman do are remotely useful to the world, rather then zero sum rat race crap that the world would lose nothing if they left the workforce.

Why would corporate work done by women be any more or less useful/less than that done by men? The roles in most offices are 100% interchangeable.

It sounds like you're just getting started with daycare. It's difficult to believe anyone with substantial experience with the institution would agree with you. asdf's first point is close to reality, leaving his second point aside.

You can get better daycare experiences for more money, but there's a limit, and being in the company of strangers eight or ten hours a day is stressful and exhausting for small children.

I think we fall under the "better experience for more money" category. These aren't state subsidized day cares. We're paying full freight in upper middle class neighbourhoods. (For North American definitions of 'upper middle class'.)

I'm aware of the downsides. Those are some of them. There are others. In my original posting I was responding to the implied economic inefficiency of his cartoon vision of day care in Sweden; I don't see economic inefficiency in all day care situations, and I see some non-economic advantages. Considering also the downsides I'll leave it to interested parties to do their own cost/benefit analyses.

Maybe state subsidized day cares are closer to Steve's vision than my experience is. [ 4 years for daughter until she reached JK (currently in Gr. 1 and now doing after-school care), son will be coming up to day care in a few months. That's enough of a baseline to have an informed opinion I think. I concede that there could be differences between my experiences and state subsidized Swedish day care. ]

We're veterans of the $2k/child/month daycare experience (*), and while everybody's different, we are amazingly happy we gave it up. I was quite skeptical at first, figuring my career-oriented wife would go nuts, but now we'll never go back. My wife gave up a six-figure job (and the first digit wasn't "1") and it's one of the best decisions we ever made.

(*) Around here, that kind of money gets you local staff with real training in a nice facility, but it doesn't make the experience any less taxing for the kids.

Rich people obviously have more resources to cushion the effects of their actions. If your both making six figures you can maybe afford an au pair instead of an illegal. It's still not the same, but its more defensible, and for certain women its probably a good thing (not everyone is naturally mothering).

However, that's like 1% of women. Most have shit jobs that don't provide actualization and don't even make much when you take taxes and extra expenses into account.

I think the point is that they affect the % of pay that you can put towards discretionary spending (where income taxes and work related costs such as childcare and transportation all subtract from that). Suppose I work for $50 / hr and childcare takes $10 / hr of that. This isn't inefficient or distortionary in the classic sense, but it does change my discretionary earnings and thus my incentive to work. If childcare is free, then this distorts discretionary earnings upwards, increasing the incentive to work vis a vis user-pays childcare.

This is inefficient of course, but at least for labour supply decisions some of the distortion offsets against some of the distortion from having higher (well, nonzero) income tax, and thus in net terms is less distortionary than having the higher income tax alone. Of course, it creates all sorts of secondary distortions as well, so it'll be more distortionary than just having lower income tax and user pays childcare, but I guess the point is that the difference is 'smaller than one would think'.

I agree with this comment. When I read this pist, my first rhiught was " what part of the welfare state can't be articulated by one indirect route or another as support for the workforce?" But a real insight would be to quantify that impact.

A couple of quotations from the article:

"...bus fares disappeared several years ago in Stockholm after public transport unions declared that handling cash had become a 'work environment problem.' Bus drivers were getting attacked for their fares and so Stockholm banned cash on public transport,” says Arvidsson. “There was also a spate of bank robberies, so four years ago, the banks began to move away from cash. "


“Swedes are pretty trusting and we’re used to embracing new technology so this was the perfect solution,” and “People trust each other, the government and the banks more in Sweden,”

So, one of the reasons for eliminating cash was that untrustworthy people were attacking bus drivers in order to steal it, and, at the same time, one of the big reasons why the cashless payment system works in Sweden is because people trust each other.

Oh yeah, and this quotation:

“There’s a worry about fraud as well,” says Stockholm based private security expert Björn Ericsson. “With figures from the Swedish National Council for Crime Prevention showing that fraud has more than doubled in the last decade.”

That mystery is easily solved: 30% of Swedes are not Swedes. They are middle eastern immigrants with the same attitude and trust as you will meet in the streets of Damascus... I mean ruins of Damascus. That is the reason why bus fares were dropped. The Swedes just wont admit. As they wont admit to a long list of other realities such as the world record beating rape rate which mostly is executed by the newcomes, except we dont know because registreting the cultural background of perpetrators in the statistics is forbidden. This is sadly all true and Im not exagerating. Sweden is a concept of the past.

Have you ever been to Syria, Carsten?

"That mystery is easily solved: 30% of Swedes are not Swedes. They are middle eastern immigrants.."

That's an exaggeration, but not as much as I would have thought.

"According to Eurostat, in 2010, there were 1.33 million foreign-born residents in Sweden, corresponding to 14.3% of the total population. Of these, 859,000 (9.2%) were born outside the EU and 477,000 (5.1%) were born in another EU Member State."

So, roughly 10% are from third world countries, though not all of that is actually middle eastern.

Sweden may well become a test case for large low skilled immigration into a welfare state. If the average low skilled immigrant contributes less to taxes than the average rate, then taxes must go up.

That figure is to low. More like 15% non-Whites live in Sweden. You forget the large proportion of 2. and 3. generation immigrants from 3. World countries, and the mixed progeny due to miscegenation.

The study shows taxes in a % GDP basis, but it's clear from the first chart, that it's only considering Federal taxes for the US. US citizens have substantial extra taxes at the State and Local level. Do countries like Sweden have an extra 10+% in taxes on top of the 45.8% listed?

Interesting paper read for the layman. My favourite take-away (and probably largest factor when trying to assess differences across countries) was from the 'Social and Cultural Influences' section, dealing in such issues as feelings toward the poor (lazy vs bad luck), the basic trustworthiness of people in general, social motivations (voter turnout, charitable contributions, etc.), where the US and UK were very much diametrically opposed on these issues from the Scandinavians. This should be taken further to inquire about tertiary school success/effort, effort vs. promotion success, attitudes to unstructured entrepreneurialism, access to your chosen profession vs going where the work is available, perceived pay to vocation chosen, consumables and services choice and availability, etc. I suppose this is more tied into the idea of seeing whether the Scandinavians are 'sheepish', uninspired, unambitious, and risk adverse in all things to do with amassing wealth, directing career paths, and creating social standing.

few nonwhites == a weak elite and a strong people

I rememeber during the Egyptian protests one protestor said, “this is our country—we have been here for 7000 years—it is not Mubarak’s.” He didn’t say, “this is the country we moved to 7 years ago, probably our grandchildren will live somewhere else, it does not belong to Mubarak.”

apples to apples and oranges to oranges. Stick with the fundamentals, grasshopper

Very true. A cosmopolitan elite run amok is on the verge of destroying many western countries. Western elites have declared war on especially the indigenous Europeans of the World. They declare that they need to be "deconstructed" and reduced to minority status in every single country of the World.

Two reasons Sweden can do almost anything differently than the US. There are only 7 million people. Their young leave for elsewhere to find opportunity.

Other than that it is a universal utopia applicable anywhere.

Maybe in the future such comparisons should be between Sweden and Minnesota -- similar populations, ethnic backgrounds, climate, and even tensions with recent immigrant groups.

Well, Tino Sanandaji has done some comparisons between Swedes and Swedish-Americans:

And between Somalis in Sweden and Minnesota:

"There are only 7 million people. "

9.7 million

It doesn't change your point, of course.

"Their young leave for elsewhere to find opportunity."

Citation needed. Sweden isn't Ireland or Portugal. And insofar as Swede do leave, it'd mostly be to other European countries with free or cheap health care, child care, college, and nominally high taxes.

On the welfare cost of childcare subsidies in Sweden see:
Public Employment, Taxes and the Welfare State in Sweden
Sherwin Rosen, NBER Working Paper No. 5003 January 1995

"All employment growth in Sweden since the early 1960's is attributable to labor market entry of women, working in local public sector jobs that implement the Welfare State. Sweden has 'monetized' or 'nationalized' the family. Women are paid at public expense to provide household services for other families. Subsidizing purchased household services encourages labor force participation of women through substitution of market- for self-provided services. It also reduces the marginal cost prices of household goods and encourages substitution of household goods for material goods. A kind of social cross-hauling occurs: when subsidies are increased and taxes raised to finance them, production of material goods declines and production of household goods increases. Women enter the market and work more in each other's households and less in the material goods sector. Efficiency distortions of current child policies in Sweden may be as large as half of total expenditures on childcare. The current 90% subsidies to public childcare probably involve large deadweight losses. A one percent decline in the rate of subsidy accompanied by balanced budget tax decreases would reduce the deadweight losses of tax distortions by one percent, at current policy levels."
It is also not surprising that IKEA came from Sweden. It's model fits with the incentives that exist there for the substitution of household production for market assembly of household goods - contributing to reduced employment in the material goods sector.

How you frame the headline frames the reaction:

Try this headline instead:

How Can Scandinavia Provide So Many Social Services...Like Education, Childcare, Medical Care, etc.?

And, they are the happiest:

From Forbes summarizing happiness by country: "So who’s the happiest? As has been the case the past five years, that distinction goes to countries that enjoy peace, freedom, good healthcare, quality education, a functioning political system and plenty of opportunity: Norway, Sweden, Canada and New Zealand."

What a difference a headline makes.

Cold, resource-rich and white.

New Zealand is kind of an exception as its Anglo immigrant population assimilates to the nationalist, communitarian Maori culture.

Resource rich Sweden? Rich Canada? Rich New Zealand?

Other countries are richer. Other countries have even more resource wealth. (Resource wealth, by the way, can either go into a Sov Wealth Fund, or into the hands of a Royal Family, so just having resources doesn't mean much in itself, unless what you mean is that the state taxes the resource wealth (i.e. sovereign wealth fund) which then redistributes as services.)

Anti, Why ignore the obvious that was pointed out by Forbes: good healthcare, quality education, a functioning political system, and plenty of opportunity.

How did the Swedes get all that? Elves, pixie dust?

Except the taxes really aren't that high. The government's take is around 40%, like pretty much everywhere else in the West.

Ah, so that explains Kiwis' reputation for illiteracy and cannibalism.

Govt spending per capita 2009 (most recent I could find).

Norway 21k
Austria 18.9k
Sweden 18.8k
Denmark 18.7k
France 17.6k
USA 17.3k
Belgium 17.2k
Finland 16.3k
Iceland 15.8k
UK 15.4k
Germany 15.1k
Canada 14.9k
Switzerland 13.8k
Australia 12.7k
Japan 11.8k
New Zealand 10.7k

There are a lot of happy countries on that list that spend less per capita than the US. Canada, Australia, New Zealand, Finland, Switzerland. Maybe the problem is how we spend not how much we spend.

I think they did a global survey a few years back and found the happiest country was Chad, thus demonstrating the silliness of comparing subjective ratings.

Taxes, schmaxes. Can't get a drink in Sweden!

Wouldn't it be great if there was free immigration between Sweden and the US. Then anyone who preferred the Swedish mix of high taxes/high state benefits could emigrate from the US, and any Swede who preferred the US mix of lower taxes/less benefits could do the reverse. I wonder what impact that would have on the long term future of the two countries, and what types of people would move from US to Sweden.

The impact would be minimal, because when it comes to immigration, tax rates and state benefits are not really all that important. Otherwise , most of Spain would have emigrated already.

That's why immigrant populations are rarely representative of their home country. Most people won't move to another culture, another language, and across multiple timezones.

Besley and Person paper killer sentence: "Why Do Developing Countries Tax So Little? Timothy Besley and Torsten Persson - Tax-compliance norms may also emerge in part from a strengthened sense of national identity. Many weak states also exhibit a weak sense of national identity among their citizens. This is one way of understanding the classic Hintze (1906) and Tilly (1990) argument linking war and taxation discussed above. It is also consistent with a positive correlation in the data between tax revenue and years spent in war. "

War also explains the rise of the big state in the USA: it took off with WWI (or rather, helped cause the Great Depression, indirectly) and especially WWII. But paying for the military is a drag on an economy: ask Japan and Germany who did not have to pay for defense after WWII, look at their growth.

When I hear the words Scandinavia and policy pronounced together I feel a welcoming sound. When I hear pronounced together the words Africa and policy, or America and policy, or Japan and policy, or even Europe or Australia and policy, a flight or fight reaction tries to kick in. As Proust or Knausgaard might have said, I have years of personal bravery - physical and emotional - in my past to help me efficiently defeat that reaction, but I wonder, is the obvious reason for that unwanted reaction not obvious to everybody else? By the way this a rhetorical question, I know the answer. The heart of man is deceitful above all things, as the prophet said.

I hear all these tales of Scandinavian countries have low infant mortality, high life expectancy, high levels of life satisfaction, low rates of crimes of violence, affordable health care, sound education systems, high levels of trust, low levels of melanin etc etc etc - a paradise. These stories must be false because high taxation is the root of all evils.

I'm curious, how did the Scandinavian countries do on those metrics, before they had high rates of taxation?

I could stomach being taxed at a much higher rate if I knew I didn't have to:

1. Save up for my kids' college expenses,
2. Save up in case I experience a serious medical issue and/or have to not work for an extended period of time for medical reasons,
3. Save up so I can supplement my guaranteed old-age income (S.S.) in order to not live like a pauper,
4. Pay an arm and a leg for decent (key word) health insurance whenever I'm self-employed.

We actually had something like that. Then came globalism.

I think in a lot of ways we're just running in place.

Convergence of global wages due to globalism. On the plus side, while developed economies wages have been relatively static, developing economies wages have sky rocketed. So, the gap has closed substantially, and the convergence pressure has probably reduced.

At least that's my pie in the sky theory.

Localized authority and very strong institutions that prevent the kind of misallocation that characterizes (say) Detroit, or Venezuela.

The Scandinavian system suffers from the same problem all tax and subsidise systems suffer from. You're only getting your money's worth if you have the 'correct' lifestyle. If you don't have kids, don't have elderly relatives and own your own transport, you just pay out and get nothing back.

And you have never been a child and benefited from free education, free dental, vaccinations, health care, free university with grants, and did not have working parents earning an inheritance for you because they did not have to interrupt their careers looking after you.

And as long as you don't end up having children, or getting ill in any way. And don't grow old.

And in fact, do not interact with society in any way, because the knock on effects in terms of things like reduced crime etc can be pretty huge.

So yes, as long as you never were born, never grow old, and never interact with anyone at all you don't really benefit from your taxes.

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