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2 - Improving the performance of the European social model: the welfare state over the individual life cycle
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- By Assar Lindbeck, Professor of Economics Institute for International Economic Studies, Stockholm University
- Edited by Jordi Gual, IESE Business School, Barcelona
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- Book:
- Building a Dynamic Europe
- Published online:
- 22 September 2009
- Print publication:
- 15 January 2004, pp 39-69
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Summary
Introduction
Welfare state arrangements are more comprehensive in Western Europe, or Europe for short, than in other parts of the world. As a result, welfare state spending (including expenditures on education) typically hovers at around 25–35 per cent of GDP among European countries (gross figures, OECD, 2002). The achievements are also impressive. In particular, there is considerable income security over the individual's life cycle, largely as a result of social insurance. Governments have also boosted the consumption of various types of (personal) social services with strong elements of investment in human capital – in particular, education and health care, as well as child care in some countries. Poverty has also been mitigated, not only as a result of social insurance but also via selective income support and social services that are made available for low-income groups. In countries where the children of low-income groups enjoy a relatively large share of aggregate education services, the factor incomes of these groups have also improved.
Some welfare state arrangements also contribute to favourable economic and social dynamics. For example, when aggregate investment in human capital is stimulated, future labour productivity is boosted, which in turn improves the future aggregate tax base. As a result, in a long-term perspective, these types of welfare state spending may even be ‘self-financing’ for the government – an example of virtuous welfare state dynamics.
5 - Lessons from Sweden for Post-Socialist Countries
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- By Assar Lindbeck, Stockholm University
- Edited by János Kornai, Harvard University, Massachusetts, Stephan Haggard, University of California, San Diego, Robert R. Kaufman, Rutgers University, New Jersey
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- Book:
- Reforming the State
- Published online:
- 05 June 2012
- Print publication:
- 15 January 2001, pp 145-180
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Summary
When reforming their own countries, several observers, ideologues, and politicians in former socialist countries have pointed to Sweden as a blueprint. It is believed that Sweden, or the “Swedish model,” has combined the efficiency, dynamism, and flexibility of capitalist market economies with the economic security and egalitarianism so highly valued by many social liberals and socialists. So, an analysis of the Swedish experience, and its relevance to former socialist countries, may be of some general interest.
When addressing this issue, it is important to realize that basic features of the economic and social system in Sweden have changed considerably over time.Though attempts to divide history into periods are hazardous, in this chapter I will partition modern economic and social history in Sweden into three periods.The first, the century from about 1870 to 1970, may be called “the period of decentralization and small government.” During this period, the economic system in Sweden did not differ much from the ones in other countries in Western Europe, although Sweden was probably one of the least regulated economies in this part of the world. The second period, from 1970 to 1985–90, may be characterized as a “period of centralization and large government.” In this time span, Sweden acquired idiosyncratic features, though still within the framework of a capitalist market economy.
Comment
- Edited by Lars Jonung
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- Book:
- The Stockholm School of Economics Revisited
- Published online:
- 05 July 2013
- Print publication:
- 29 March 1991, pp 262-265
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Summary
Exactly how should we formulate alternative interpretations of Keynes's theory of aggregate demand and employment? This is, it seems to me, the main issue that is raised by Clower's paper. (I leave out the question of what Keynes actually meant himself, on the ground that I have nothing to contribute to that exegetic issue.)
Let the term “Keynes I” refer to a macromodel in which the aggregate product market is in (Marshallian or Walrasian) equilibrium, while the labor market is in disequilibrium in the sense that at least some house-holds (those that are involuntarily unemployed) are inside their (notional) supply curves for labor as a result of sticky nominal wages. Let the term “Keynes II” refer to a macromodel in which there is simultaneously excess supply in both the labor market and the product market as a result of stickiness of both nominal wages and nominal prices; this model corresponds, of course, to the Barro-Grossman interpretation of Keynes, and it is the foundation for the simple multiplier model and the 45° cross diagram.
Whereas the “Keynes I” model implies that changes in employment are depicted as movements along a notional demand curve for labor, the “Keynes II” model implies that an (vertical) “effective” labor demand curve shifts in response to changes in product demand. With either of these interpretations, Keynes certainly made an important contribution to macroeconomics by suggesting mechanisms both for the determination of the actual level of aggregate output and employment and for influencing the labor market by way of variations in aggregate product demand.
Roundtable discussion
- Edited by Lars Jonung
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- Book:
- The Stockholm School of Economics Revisited
- Published online:
- 05 July 2013
- Print publication:
- 29 March 1991, pp 451-466
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Summary
It is important to emphasize the obvious distinction between the Stockholm economists of the 1930s and the Stockholm School of Keynesian-oriented macroeconomics. The former was a brilliant group of individuals who, except for Erik Lundberg, made their main contributions in fields outside of Keynesian-oriented macroeconomics. I refer, for instance, to Erik Lindahl's contributions to the theory of public finance, intertemporal allocation of resources, and the theory of interest rates and prices; Bertil Ohlin's achievements in the theory of international trade; Gunnar Myrdal's creative discussion of uncertainty and his reinterpretation of Wicksell's monetary theory (as well as his later monumental work on the race problem in the United States); and Ingvar Svennilson's microeconomic theory of the firm (as well as his subsequent empirical analysis of economic growth and structural change in Europe). I make this obvious point simply to emphasize that our judgment of the contributions to economics of this brilliant group of people should not be made solely on the claims, emanating mainly from Myrdal and Ohlin, that they anticipated Keynes's General Theory, but also on their achievements in other branches of economic analysis.
I basically agree with the judgment of Don Patinkin and Paul Samuelson that the contribution of the Stockholm School to “the Keynesian Revolution” was rather modest. First, the Stockholm economists of the 1930s did not really have a full-fledged theory of the determination of aggregate output and employment and of “transmission mechanisms” from product to labor markets.