Eurosclerosis or Financial Collapse: Why Did Swedish Incomes Fall Behind?

 
Author/Editor: Cerra, Valerie ; Saxena, Sweta Chaman
 
Publication Date: February 01, 2005
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: Sweden represents an archetypal welfare state economy, with extensive government safety nets. Some scholars have attributed a decline in its per capita income ranking since 1970 to "eurosclerosis" or sluggish growth caused by distortionary policies. This paper argues rather, that the permanent loss in output following Sweden's banking crisis in the early 1990s explains the decline in its per capita GDP ratings. The paper finds no macroeconomic evidence that welfare state policies have deterred growth. The results warn that empirical growth analyses should distinguish between trend output growth and permanent output loss associated, for example, with financial crises.
 
Series: Working Paper No. 05/29
Subject(s): Production | Sweden | Financial crisis | Social policy | Income

Author's Keyword(s): Financial Crisis | Welfare State | Sweden | Output Loss
 
English
Publication Date: February 01, 2005
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2005029 Pages: 25
Price:
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