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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 19:
Economic Growth and the Swedish Model

Magnus Henrekson, Lars Jonung () and Joakim Stymne

Abstract: We examine the growth performance of Sweden in the post-World War II period, focusing on explaining the relative decline of economic growth in Sweden since the early 1970s. The hypothesis that the relative decline is a consequence of productivity catch-up is rejected. A number of potential "ultimate" causes behind the slowdown are explored. An increasingly inefficient process of capital formation; a shrinking share of the economy being exposed to international competition; long-run negative effects of activist stabilisation policies; rapid growth of the public sector; deteriorating incentives for human capital formation; and weak incentives for implementing the results of R&D efforts are all part of the story. The evidence suggests that the incentive structure created by "the Swedish model" made Sweden less successful in adapting to the shocks of the 1970s and 1980s than other OECD countries.

Keywords: Catching up; convergence; economic growth; human capital; productivity; welfare state; (follow links to similar papers)

JEL-Codes: O1; O52; (follow links to similar papers)

76 pages, May 1994

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This paper is published as:
Henrekson, Magnus, Lars Jonung and Joakim Stymne, (1996), 'Economic Growth and the Swedish Model' in Crafts, N. and G. Toniolo (eds.) Economic Growth in Europe Since 1945, Cambridge University Press.



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