Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2016:3: Building a path of equality to economic progress and macroeconomic stability - the economic theory of the Swedish model

Lennart Erixon ()
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Lennart Erixon: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden

Abstract: The Swedish Rehn-Meidner model is a unique economic- and wage-policy program for the simultaneous achievement of full employment, price stability, growth and equality. This article presents, specifies and develops the model’s underlying macroeconomic theory. The Rehn-Meidner theory is a synthesis between a flex-price Kaldorian model of profit margins and a Kaleckian model where profit margins are squeezed under full-employment conditions. The theory deviates from both Kaldorian and Kaleckian models by stressing the importance of low profit margins for productivity growth. The Rehn-Meidner theory and policy deserve a prominent place in macroeconomics even in the age of globalization and financialization. However, some weaknesses of the model make it necessary to modify the arguments for and partly the composition of its policy program.

Keywords: Rehn-Meidner model; labor market policy; wage policy of solidarity; structural change; productivity growth; inflation

JEL-codes: E11; E12; E23; E24; E25; E31; E32; E62; F43

54 pages, September 30, 2016

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