Scandinavian Working Papers in Economics

Papers in Innovation Studies,
Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy

No 2008/7: The Swedish Paradox arises in Fast-Growing Sectors

Olof Ejermo () and Astrid Kander ()
Additional contact information
Olof Ejermo: CIRCLE, Lund University, Postal: PO Box 117, Sölvegatan 16, SE-22100 Lund, Sweden
Astrid Kander: CIRCLE, Lund University, Postal: PO Box 117, Sölvegatan 16, SE-22100 Lund, Sweden

Abstract: The aim of this paper is to examine whether the previously observed gap between growth of R&D and economic performance, known as the ‘Swedish paradox’, is a general phenomenon across all sectors of the economy, or only occurs in specific industry segments. The dataset used for the analysis covers nearly the entire Swedish economy 1985-1998, divided into five broad sectors: Fast-growing industries, Slow-growing industries, Industrial outphasers, Fast- growing producer services and Other services. The growth of R&D, value added and research productivity is compared for these sectors and the largest gap between R&D and value added is located to the fast growing sectors of the economy. The Swedish paradox is therefore not necessarily a sign of weakness or deficiency of the innovation system, but rather indicates that long-term growth requires large investments in knowledge-building resources.

Keywords: Swedish paradox; sectors; R&D; research productivity; economic growth.

JEL-codes: O30

34 pages, June 1, 2008

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