Based on institutional economics, the paper develops a new model pointing at two main reasons why Scandinavia is doing so well in economic terms, namely the level of decentralisation and social capital in its broad sense. The idea in the model is that a political system, which decentralises power, means less lobbyism because access to economically harmful rent seeking is more costly. Consequently, social capital and the trust in other people and the political leadership will increase. This model, suggesting one single social capital measure, is applied to countries in both Western and Eastern Europe. The social capital ranking results indeed show that Scandinavia (Denmark, Norway, Sweden and Finland) is among the seven top ranking countries together with Switzerland, the Netherlands and Iceland.
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Paper provided by University of Aarhus, Aarhus School of Business, Department of Economics in its series Working Papers with number
02-15.
Find related papers by JEL classification: D60 - Microeconomics - - Welfare Economics - - - General H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology
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