A new method for integrating behavioral responses into static tax-benefit microsimulation models has been proposed. The approach uses elasticity estimates from academic literature to incorporate behavioral effects when structural labor supply models are unavailable. Researchers distinguish between income responses at the intensive and extensive margins. The framework was implemented in Norway’s LOTTE microsimulation system, analyzing two policy scenarios: a five percentage-point tax increase in top labor income brackets and a work-related income deduction. Results indicate behavioral adjustments significantly offset revenue impacts from high-income tax hikes, while the work deduction spurred participation but exacerbated revenue losses due to phase-out effects. The study, authored by Zhiyang Jia, Snorre Skagseth, Thor O. Thoresen, and Trine E. Vattø, was published on 4 February 2026.
Source: Statistics Norway (Statistisk sentralbyrå).
Text/data reproduced from https://www.ssb.no/.
Licence: Creative Commons Attribution 4.0 International (CC BY‑4.0).
Licence link: https://creativecommons.org/licenses/by/4.0/
https://www.ssb.no/en/inntekt-og-forbruk/skatt-for-personer/artikler/a-practical-framework-for-behavioral-microsimulation-using-external-evidence
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