CAFO Working Papers, Centre for Labour Market Policy Research (CAFO), School of Business and Economics, Linnaeus University
No 2006:6:
The Swedish Model in Turbulent Times: Decline or Renaissance?
Dominique Anxo ()
and Harald Niklasson ()
Abstract: The main objective of this paper is to analyse the major
transformations of the Swedish model. We argue that the current Swedish
model appears today more in line with the three core components of the
original Swedish model developed during the 1950s. In our view, the period
1975-1991 represents a clear deviation from the original Swedish model, a
departure that culminated in the most severe crisis than Sweden has
experienced since the 1930s. After this period of turbulence, the Swedish
economy has undergone a particularly favourable development. Unemployment
has been cut by half, inflation has been curbed and the country appears to
have recovered from the deep economic crisis of the early 1990s.
The
changes in economic policy towards a more restrictive and anti-inflationary
macro-economic policy, the reorientation of active labour market policies
towards supply oriented measures and the structural reforms undertaken in
the tax and social protection systems during the 1990s suggest a revival
and renaissance of the traditional Swedish model. The modifications in
Swedish industrial relations, in particular the clear tendency to a
re-coordination of collective bargaining have also played a vital role in
the Swedish recovery. These new developments appear to respond to a
three-pronged objective: ensuring industrial peace; limiting the impact of
transaction costs associated with the absence of coordination mechanisms
and the negative externalities on employment and firm competitiveness of
uncontrolled wage drift; and finally guaranteeing a principle of
subsidiarity making it possible to adapt the provisions contained in
industry-wide collective agreements to the productive and competitive
constraints of Swedish companies. The various reforms of the social
protection system undertaken during the 1990s have essentially taken the
form of a temporary reduction of income replacement rates and, with the
notable exception of the restructuring of the tax and pension system, have
left the Swedish welfare state system almost intact. The Swedish welfare
state remains, by international standards, still clearly universal and
inclusive in nature and still enjoys a high level of across the board
political and public support. The reshaping of the pension and the tax
systems aiming at strengthening work incentives are also clearly in line
with the general philosophy of the original Swedish model favouring
integrative transitions instead of passive support and social exclusion.
The recent modifications of the Swedish model constitute an interesting
advance, creating an institutional framework favourable to the emergence of
negotiated flexibility and a return towards a more balanced economic and
employment growth. In our view, these developments reinforce the coherence
of the Swedish Model and the robustness of its social cohesion.
Keywords: Swedish Model; Macro economic policy; employment policy; Industrial relations; welfare state; (follow links to similar papers)
JEL-Codes: J53; J58; P16; (follow links to similar papers)
42 pages, January 16, 2006
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