“Economic Growth and the Swedish Model” Magnus Henrekson, Lars Jonung, Joakim Stymne

A scientific explanation of the decline of the so admired Swedish Model, the Social Democratic Welfare state with high taxes and a ever increasing public sector that relies on Keynesian stimulus that leads to a viscous circle of high government debt that has to be managed by using high inflation as well as continuous devaluations of the currency to keep of international competitiveness.

What begs the question is why president Obama wants to emulate a failed model?

 

“Economic Growth and the Swedish Model”

 

Magnus Henrekson, Lars Jonung, Joakim Stymne 2004

 

Introduction

 

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.

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