The Nordic Model - Embracing globalization and sharing risks

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ecause of the high rate of labour force participation of women. True enough, average hours worked (of the whole population) are higher in Spain and Portugal, but productivity is low in these countries. Also, the level of productivity is higher in many continental countries, but they tend to have low employment rates. High employment and high productivity is achieved mainly by the Anglo-Saxon and the Nordic countries. This also means that these countries achieve a relatively high level of GDP per capita, which is the product of hours worked and productivity. To show this, figure 3.1 also gives the “level curves” (or “isoquants”) going through the points for Germany and Finland; the defining characteristic of the level curves is that all points on these curves represent the same level of GDP per capita as in Germany and Finland, respectively. One may add, though, that disposable income and private consumption per capita are low in the Nordic countries, barely above the level in Southern Europe, as the public sector absorbs a large fraction of the income generated in the economy. 1 3.2 GROWTH AND TECHNOLOGY Much of European growth differentials in the past 4–5 decades is explicable as a process of catching up of the (initially) poorer countries Nordic growth in the past decade or so has been comparatively favourable and has benefited from the IT revolution We now turn to the dynamic perspective and examine the Nordic growth performance. A first observation is that the Nordic growth rate of GDP per capita since 1960 does not seem to deviate much from what could be expected in a “catching up” framework (see figure 3.2). Only Finland achieved, over the period 1960–2006, a growth rate of GDP per capita somewhat above what could have been expected assuming catching up and considering the level of GDP per capita at the start of the period. Growth in Denmark and Sweden was below the average in the EU15, but this seems broadly explicable in view of their relatively high starting level. Ireland is an obvious “outlier” with a rate of growth roughly one per cent higher than could be expected on the basis of the average relation between the level and rate of growth of GDP per capita. More information on the recent growth performance is provided by figure 3.3, which shows the development of GDP per capita in purchasing power parity terms relative to the US The performance of the Nordic model · 47
from the mid-1980s. Finland has gradually been catching up with Denmark and Sweden; the Nordics are now very close also in this dimension. For Finland and Sweden the early 1990s were a 4.5 4.0 Ire 4.0 GDP 3.5 Por Gre 3.5 Spa 3.0 Fin 3.0 2.5 Ita Aut Bel Fra Den Net W-Ger 2.5 2.0 UK Swe 2.0 400 600 800 1000 1200 1400 4.5 Average growth of per capita GDP per capita in 1960 Figure 3.2 Growth of GDP per capita, EU15, 1960–2006 Source: Eurostat. Ind 95 90 85 80 75 70 65 1985 90 95 Denmark Finland Sweden Euro area 2000 05 Ind 95 90 85 80 75 70 65 Figure 3.3 Levels of PPP-adjusted GDP, USA=100, 1985–2006 Source: IMF. 48 · The Nordic Model
Page 1 and 2: The Nordic Model Embracing globaliz
Page 3 and 4: ETLA B232 ISBN 978-951-628-468-5 IS
Page 6 and 7: THE AUTHORS Torben M. Andersen is P
Page 8 and 9: CONTENTS PREFACE THE AUTHORS 1 INTR
Page 10: 8.5 The future of public services -
Page 13 and 14: Globalization is primarily an oppor
Page 15 and 16: ices financed by taxes, which are h
Page 17 and 18: 14, respectively, out of a total of
Page 19 and 20: are the effects of technical change
Page 21 and 22: - and, particularly, their effect o
Page 23 and 24: not contesting economic growth as t
Page 25 and 26: 1.6 AN EFFECTIVE WAGE BARGAINING PR
Page 27 and 28: etter be tried in individual cases
Page 29 and 30: The scheme of the social contract c
Page 31 and 32: is worthy and realistic. But the de
Page 33 and 34: supportive interaction of openness
Page 35 and 36: The financial deregulations in the
Page 37 and 38: horizontal axis). These indices are
Page 39 and 40: does can nowadays be seen, in a bro
Page 41 and 42: employment increases in the public
Page 43 and 44: are not at the top of the league, t
Page 45 and 46: ENDNOTES 1 Wikipedia refers to popu
Page 47: consider employment and productivit
Page 51 and 52: % 7 6 5 4 3 2 1 0 IT expenditure, %
Page 53 and 54: As technological change is to a sig
Page 55 and 56: 3.3 SOCIAL EQUALITY Economic effici
Page 57 and 58: 0.9 0.8 0.7 Net Fin Den 0.9 Composi
Page 59 and 60: ANNEX: GROWTH ACCOUNTING The Nordic
Page 61 and 62: sources of GDP growth in the EU15,
Page 63 and 64: 11 These decompositions have been c
Page 65 and 66: 4.1 THE WELFARE STATE AS A SOCIAL C
Page 67 and 68: The extent, coverage and quality of
Page 69 and 70: % % 80 80 60 60 40 20 0 OECD max Fi
Page 71 and 72: % 80 Total Old age % 80 60 60 40 40
Page 73 and 74: tem is seriously affected. Today, t
Page 75 and 76: Historically, however, the share of
Page 77 and 78: More children. Since the problem is
Page 79 and 80: Actually higher growth may make the
Page 81 and 82: dependency ratio driven by the baby
Page 83 and 84: 82 · The Nordic Model
Page 85 and 86: to handle much bigger fields today,
Page 87 and 88: Table 5.1 Projections of public hea
Page 89 and 90: 5.4 AN EASY FIX - BRING SERVICES BA
Page 91 and 92: Box 5.1 Growth and the welfare stat
Page 93 and 94: it implies that the long-run defici
Page 95 and 96: The level of taxation is already hi
Page 97 and 98: One may ask why this problem arises
Page 99 and 100:
globalization may contribute to bot
Page 101 and 102:
able to pay to seek private solutio
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102 · The Nordic Model
Page 105 and 106:
ily policies that Nordic demographi
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absolute and relative terms than hi
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in the participation decision of th
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Table 6.2 The activity rate, aggreg
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Thus, responsible unions should res
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als take part in various unemployme
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Box 6.2 What is the Danish “flexi
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ENDNOTES 1 In his history of the ec
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particularly noteworthy in a euro a
Page 123 and 124:
7.2 COORDINATION AND DECENTRALIZATI
Page 125 and 126:
also depends on the business cycle.
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ut not in any dramatic way (cf. fig
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displays higher nominal rigidity th
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model stem from an age in which the
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mostly in the years 1980-2000. For
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Table 8.1 Government expenditure by
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ure. This selection bias alone will
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that everyone gets their worth as m
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8.3 THE CASE FOR GOVERNMENT PROVIDE
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maximizing firms tend to focus exce
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than zero based budgeting) are impe
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sectors, place at or above the medi
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The demands for objectivity limit w
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assessed case by case. The importan
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c. Vouchers Vouchers are issued by
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mechanically in the political debat
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ENDNOTES 1 The private sector inclu
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The biggest hurdle to overcome for
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ment has a higher return when spent
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REFERENCES Adema, W. and Ladaique,
Page 165 and 166:
Jonung, L. and Hagberg, T. (2005):
Page 167:
Is there a Nordic model? What are t
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