Working Paper Series, FIEF - Trade Union Institute for Economic Research
The 'Third Way' Revisited. A Revaluation of the Swedish Model in the Light of Modern Economics.
Abstract: The macroeconomic principles behind the Swedish model were
developed by two trade union economists, Gösta Rehn and Rudolf Meidner,
shortly after World War II. The model’s economic and wage policy represents
a unique third way between keynesianism and monetarism in its approach to
combine full employment and growth with price stability and equity. This
essay describes the content and economic foundation of the Rehn-Meidner
model and evaluates its validity in the light of later theoretical and
empirical work. With some exceptions, the model is either in harmony with
or a serious challenge to current thinking about employment, inflation and
growth. The model’s main contribution to economics is its dynamic
description of wage formation, giving room for both competitive forces,
X-inefficient firms and wage setting phenomena such as relative wage
preferences, labour market policy and a wage policy of fairness. The model
also makes a valuable contribution to modern growth economics by
incorporating the idea that structural change and company productivity can
be promoted by profit squeezes induced by wage and economic policy.
Keywords: Profits; Inflation; Fair Wages; Labour-market policy; Fiscal Policy; Employment; Productivity; Structural change; (follow links to similar papers)
JEL-Codes: E24; E31; E60; J41; O11; (follow links to similar papers)
99 pages, March 27, 2000
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