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The Rise and Fall of Swedish Unemployment

  • Holmlund, Bertil


    (Department of Economics)

By international standards, unemployment in Sweden remained remarkably low throughout the 1970s and the 1980s. In the early 1990s, however, the unemployment rate skyrocketed and hit double-digit levels. Unemployment remained high for several years but exhibited a marked fall from 1997 and onwards. The paper describes this development and discusses the causes of the rise and fall of unemployment. It is argued that the steep rise in unemployment was mainly the result of a series of adverse macroeconomic shocks, partly self-inflicted by bad policies and partly caused by unfavourable international developments. Institutional factors, such as a trend increase in the generosity of unemployment insurance, caused some secular rise in NAIRU but do not appear as promising explanations of the events of the early 1990s. The fall in unemployment in the late 1990s reflects a combination of favorable macroeconomic conditions and structural factors that may have reduced the NAIRU.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2003:13.

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Length: 52 pages
Date of creation: 12 Mar 2003
Date of revision:
Publication status: Published in Werding, Martin (ed.), Structural Unemployment in Western Europe: Reasons and Remedies, Cambridge MA, London UK: MIT Press, Short version, 2006.
Handle: RePEc:hhs:uunewp:2003_013
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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  8. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, vol. 59(3), pages 313-334, March.
  9. Ernst Fehr & Lorenz Goette, 2007. "The Robustness and Real Consequences of Nominal Wage Rigidity," Kiel Working Papers 1343, Kiel Institute for the World Economy.
  10. Rantala, Anssi, 2001. "Does monetary union reduce employment?," Research Discussion Papers 7/2001, Bank of Finland.
  11. Holmlund, Bertil & Storrie, Donald, 2001. "Temporary Work in Turbulent Times: The Swedish Experience," Working Paper Series 2002:1, Uppsala University, Department of Economics.
  12. Robert Shimer, 1999. "The Impact of Young Workers on the Aggregate Labor Market," NBER Working Papers 7306, National Bureau of Economic Research, Inc.
  13. Holmlund, B. & Kolm, A.S., 1995. "Progressive Taxation, Wage Setting, and Unemployment , Theory and Swedish Evidence," Papers 1995-15, Uppsala - Working Paper Series.
  14. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does Active Labour Market Policy Work? Lessons from the Swedish Experiences," Seminar Papers 700, Stockholm University, Institute for International Economic Studies.
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  17. Lundborg, Per & Sacklén, Hans, 2001. "Is There a Long Run Unemployment-Inflation Trade-off in Sweden?," Working Paper Series 173, Trade Union Institute for Economic Research.
  18. Stephen Nickell & Glenda Quintini, 2003. "Nominal wage rigidity and the rate of inflation," Economic Journal, Royal Economic Society, vol. 113(490), pages 762-781, October.
  19. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  20. Fredriksson, Peter & Johansson, Per, 2003. "Employment, Mobility, and Active Labor Market Programs," Working Paper Series 2003:5, Uppsala University, Department of Economics.
  21. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  22. Mikael Apel & Per Jansson, 1999. "System estimates of potential output and the NAIRU," Empirical Economics, Springer, vol. 24(3), pages 373-388.
  23. Holmlund, Bertil, 1997. "Macroeconomic Implications of Cash Limits in the Public Sector," Economica, London School of Economics and Political Science, vol. 64(253), pages 49-62, February.
  24. Heyman, Fredrik & Arai, Mahmood, 2002. "The Impact of Temporary Contracts on Gross Job and Worker Flows," SSE/EFI Working Paper Series in Economics and Finance 0494, Stockholm School of Economics.
  25. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345.
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  27. Bengt Assarsson & Per Jansson, 1998. "Unemployment persistence: the case of Sweden," Applied Economics Letters, Taylor & Francis Journals, vol. 5(1), pages 25-29.
  28. Giuseppe Nicoletti & Andrea Bassanini & Ekkehard Ernst & Sébastien Jean & Paulo Santiago & Paul Swaim, 2001. "Product and Labour Markets Interactions in OECD Countries," OECD Economics Department Working Papers 312, OECD Publishing.
  29. Holmlund, Bertil, 1993. "Wage setting in private and public sectors in a model with endogenous government behavior," European Journal of Political Economy, Elsevier, vol. 9(2), pages 149-162, May.
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