The Nordic Model - Embracing globalization and sharing risks

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Table 3.1 Venture capital investment, relative to GDP, 2000–2003 Shares of high-tech Early stage Later stage a Communication IT Health/ bioscience Denmark 0.057 0.065 13.2 19.3 28.2 Finland 0.085 0.104 13.5 20.0 1.3 Sweden 0.088 0.147 10.2 13.9 17.3 EU 0.041 0.089 13.5 11.7 9.9 US 0.115 0.260 26.8 35.1 13.0 a Expansion and replacement. All figures are averages for 2000–2003 relative to GDP. Source: OECD. Innovation and venture capital: The Nordics do well but not well enough den also do well in terms of both indicators. A further interesting indicator for VC investment is the share of the investment that goes into different forms of high-technology activities. Here the picture is broadly similar: the Nordics are in this respect ahead of EU on average but well behind the US. The figures suggest that the Nordic countries are doing relatively well in venture capital undertakings. However, it should be emphasized that this data shows only VC spending and not returns to VC investments; these results may give too rosy a picture. 8 Finally, it may be noted that R&D spending as a share of GDP, which is another indicator of innovative activity that may be relevant for general technological progress, is higher in the Nordics (at 2.5–3.5 per cent) than in the EU15 and the US (at some 2 per cent). Thus, the Nordic countries are doing significantly better than other EU countries as regards innovative activities, and they appear to be comparable to or not very far behind the US in these areas. More generally, this section and the Annex support the view that the Nordics have been able to create institutions and policies (in areas such as education, market regulation and innovation), which have been conducive to a relatively favourable growth performance notably since the mid-1990s. The performance of the Nordic model · 53
3.3 SOCIAL EQUALITY Economic efficiency is important in its own right and as a precondition for the realization of other ambitions, but it is not in itself the only or the most important goal of society. While it is unclear how the ultimate objective should be defined, there is no doubt that the Nordic political system attaches great importance to social considerations and the achievement of social equality or “justice”. This section will offer some brief observations on this vast topic. A first observation is that the Nordic countries, again compared mainly to the EU15, are characterized by a rather low degree of income inequality and a relatively high degree of social mobility (figure 3.6). The degree of income inequality here refers to the Gini coefficient of the distribution of income after taxes and transfers. While income inequality is rather similar in most countries before taxes and transfers (see Mahler and Jesuit (2006)), income inequality after redistribution via taxes and cash benefits differs considerably, and would most probably differ even more if Social welfare and equality are difficult to measure, but many indicators point in the same direction 0.38 Current income inequalitya Intergenerational income elasticity b USA 0.38 0.34 Spa UK Ita 0.34 0.30 0.30 Ger 0.26 0.26 Swe Fin 0.22 Den 0.22 0.1 0.2 0.3 0.4 0.5 0.6 Fra Figure 3.6 Income inequality a Gini coefficient, data from The Luxembourg Income Study (www.lisproject.org). Data refer to the year 2000 except for Denmark (2004), the Netherlands and the UK (1999). b A high elasticity value implies a high correlation between income levels of children and parents. Data from OECD (2006): Society at a Glance and Corak (2006). 54 · The Nordic Model
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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
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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 and 48: consider employment and productivit
Page 49 and 50: from the mid-1980s. Finland has gra
Page 51 and 52: % 7 6 5 4 3 2 1 0 IT expenditure, %
Page 53: As technological change is to a sig
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
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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
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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
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7.2 COORDINATION AND DECENTRALIZATI
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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,
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Jonung, L. and Hagberg, T. (2005):
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Is there a Nordic model? What are t
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