The Nordic Model - Embracing globalization and sharing risks

The Annex to this
chapter contains calculations
of the quantitative
significance
of various sources of
growth, and notably
of the big importance
of IT and “total factor
productivity”
The Nordics have advanced
more than
most on the path to
the knowledge-based
economy
particularly difficult period, as both countries experienced major
recessions. 2 Since then, both countries have grown more rapidly
than both the euro area and the US. Overall, Denmark has also
kept pace with growth in the US, while growth in the euro area
has been quite weak. 3
The growth performance of the Nordic economies has in
recent years been associated with an increased use of new technologies,
reflecting the readiness of these countries to participate
in and benefit from information and communication technology
(IT) developments. In fact, these countries were early starters in
the use of IT and had high shares of IT capital relative to most
countries already in the mid-1990s, i.e. at the time that the IT
revolution really took off. In the Annex to this chapter we will
use growth accounting to assess the quantitative significance of
various sources of growth. It indeed turns out that the contribution
of IT capital to growth has been significant since the 1990s in the
Nordic countries (similar to that in the US) and typically bigger
than that of non-IT capital.
Data on the whole confirms that the Nordic countries do well
on indicators of IT diffusion, such as IT expenditure or personal
computers (PCs) per capita. Figure 3.4 shows the expenditure on
IT as a share of GDP and the number of computers per 1000 people.
Sweden is at the top in both respects and also Finland scores
well above the average. Denmark is close to the EU average for
IT expenditure but scores very high in terms of the number of PCs
per population. According to the World Economic Forum, these
Nordic countries are at the top (with positions 1, 2 and 4) in a
global ranking measuring the environment for IT as well as the
readiness to use IT by various stakeholders.
It should be emphasized that these indicators measure the
diffusion or use of IT in the economy, while a different picture
emerges from looking at the production side. 4 In fact, IT production
has a strong role notably in the Finnish and to some extent in the
Swedish economy: the share of IT in total industrial production in
2004 was some 11 and a bit over 7 per cent respectively, while its
role in Denmark and the EU15 is on average more modest.
Many important aspects of technology are not captured by
the amount of IT capital or IT diffusion. Notably for Finland and
The performance of the Nordic model · 49