The Nordic Model - Embracing globalization and sharing risks

capital to GDP growth, since the mid-1990s, has been significant
– and typically larger than that of non-IT capital. In fact, these
countries were early starters in the use of IT and had high shares
of IT capital relative to most other countries already in the mid-
1990s, i.e. at the time that the IT revolution took off.
Second, general technological change (TFP) has been important
for the US, for Finland and also, to an extent, for Sweden.
It seems to have played much less of a role in Denmark and the
EU15. TFP growth can be thought of as a measure of technological
progress, which is not embodied in the explicit factors of production,
i.e. in labour and the various types of capital. The non-measurable
factors in TFP include innovations and improvements in
general knowledge and the organization of production. However,
since TFP growth is measured as a residual, it also contains effects
such as cyclical variations, pure changes in efficiency, and
measurement errors. 12
Third, there is more variation in the growth rates for conventional
capital. Denmark and Sweden have had positive growth in
conventional capital as well, whereas for Finland conventional
capital has played almost no role in the rapid growth in the second
half of the 1990s. Investment in conventional capital continued
to make a significant contribution to GDP growth in the US. The
Table 3.2
Growth accounting
Denmark Sweden Finland USA EU15
95–00 00–04 95–00 00–04 95–00 00–04 95–00 00–04 95–00 00–04
GDP growth 2.8 1.3 3.5 2.0 4.9 2.3 4.2 2.4 2.7 1.5
Growth contribution
Labour 0.4 -0.1 0.7 -0.4 1.0 -0.3 1.3 -0.3 0.6 0.3
IT capital 1.0 0.5 1.1 0.4 0.6 0.5 1.1 0.5 0.6 0.3
Non IT-capital 0.8 0.9 0.4 0.2 -0.1 0.1 0.7 0.4 0.6 0.5
TFP 0.6 0.3 1.3 1.9 3.3 2.0 1.1 1.7 0.9 0.4
Growth of capital services
IT capital 10.9 17.6 19.1 6.8 13.8 10.8 17.9 2.8 - -
Non IT-capital 1.4 2.9 1.7 0.7 -0.2 0.2 9.1 1.8 - -
Growth of labour input
Total hours 0.6 -0.1 1.0 -0.6 1.6 -0.5 1.9 -0.4 0.9 0.4
Hours of workers -0.4 0.1 -0.4 -0.5 -0.6 -0.8 -0.5 -0.3 -0.5 -0.3
Number of workers 1.0 0.2 0.8 0.4 2.1 0.2 1.4 0.7 1.4 0.7
The performance of the Nordic model · 59