Research Papers in Economics, Department of Economics, Stockholm University
The Theory of Transformation Pressure - a New Perspective on Growth and Economic Policy
Abstract: The theory of transformation pressure offers a uniquely
Swedish perspective on the "productivity slowdown" of the 1970s and 1980s.
One example of this theory can be found in an influential argument from the
early 1990s which states that devaluations of the Swedish currency lessened
the external pressure on manufacturing and led to a delay in structural
change and rationalisations. The theory generalises the idea that
productivity growth in firms is stimulated by intense competition, cost
pressures and low or qualified demand. The main challenge faced by such a
theory is to explain why it seems that an immediate threat is needed to get
a productive response from firms. The theory presented here assumes either
genuine uncertainty, irrational behaviour or that firms become more
creative when they are put under real pressure. Productivity growth is not
always promoted by tight external circumstances. Growth may be maximised if
pressure in each period is moderate or if periods with strong pressure are
followed by periods of financial and technical consolidation.
Keywords: Transformation Pressure; Competition; X-inefficiencies; Innovations; Productivity; Growth; Rationality; Uncertainty; R&D Investments; (follow links to similar papers)
JEL-Codes: D24; D81; L16; L21; N64; O31; (follow links to similar papers)
44 pages, December 15, 1998
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