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.
