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

February 1, 2005

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Valerie Cerra, and Sweta Chaman Saxena. Eurosclerosis or Financial Collapse: Why Did Swedish Incomes Fall Behind?, (USA: International Monetary Fund, 2005) accessed December 22, 2024

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.

Subject: Banking crises, Business cycles, Income, Labor supply, Purchasing power parity

Keywords: Per capita income, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/029
Stock No:

WPIEA2005029
ISBN:

9781451860481
ISSN:

1018-5941

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