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Economic Perfomance and Work Activity in Sweden after the Crisis of the Early 1990s

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Author Info
Davis, Steven J. () (The University of Chicago Graduate School of Business)
Henrekson, Magnus () (Research Institute of Industrial Economics)

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Abstract

Following a severe contraction in the early 1990s, the Swedish economy accumulated a strong record of output growth coupled with a disappointing performance in the labor market. As of 2005, hours worked per person 20–64 years of age are 10.5 percent below the 1990 peak and a mere one percent above the 1993 trough. Employment rates tell a similar story. Our explanation for Sweden’s weak performance with respect to market work activity highlights the role of high tax rates on labor income and consumption expenditures, wage-setting arrangements that compress relative wages, business tax policies that disfavor labor-intensive industries and technologies, and a variety of policies and institutional arrangements that disadvantage younger and smaller businesses. This last category includes tax policies that penalize wealth accumulation in the form of owner-operated businesses, a pension system that steers equity capital and loanable funds to large incumbent corporations, and legally mandated job-security provisions that weigh more heavily on smaller and younger businesses. We describe these features of the Swedish institutional setup and provide evidence of their consequences based largely on international comparisons.

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Publisher Info
Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 687.

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Length: 49 pages
Date of creation: 03 Jan 2007
Date of revision:
Handle: RePEc:hhs:iuiwop:0687

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Related research
Keywords: Business taxation Industry structure Swedish economic performance Tax effects Time allocation Wage-setting institutions Work activity

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Find related papers by JEL classification:
D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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    Other versions:
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    Other versions:
  6. Thierry Lallemand & Robert Plasman & François Rycx, 2005. "The Establishment-Size Wage Premium: Evidence from European Countries," IZA Discussion Papers 1569, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Lindbeck, Assar, 1982. "Tax Effects versus Budget Effects on Labor Supply," Economic Inquiry, Oxford University Press, vol. 20(4), pages 473-89, October.
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    Other versions:
  18. Olovsson, Conny, 2004. "Why do Europeans Work so Little?," Seminar Papers 727, Stockholm University, Institute for International Economic Studies. [Downloadable!]
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