Efficiency and equity – The Swedish economy in comparison to other countries at the beginning of the 21st century

The HDI is the geometric mean of three sub-metrics measuring, respectively, the wealth, education, and health of the population. In this way, in a concise form, it provides information about the objective conditions on which people's ability to use their natural potential depends. The construction of the indicator causes it to take a value from 0 to 1.

Published by the Human Development Office of the United Nations Development Programme on September 14, 2018, the document entitled Human Development Indices and Indicators: 2018 Statistical Update contains information on the level of HDI in 189 countries worldwide in 2017. Sweden came seventh in this ranking (ex aequo with Hong Kong). All Nordic countries ranked among the top 15 countries with the highest level of development. Norway is in first place, Iceland in sixth, Denmark in 11th place and Finland in 15th place (see Figure 1).

Figure 1

The position of Sweden compared to the other Nordic countries is presented also in Table 3.

As regards the situation in Sweden against the backdrop of the US and Poland, the relevant information is contained in Table 4. From these data, it appears that in 2017 the level of social development in Sweden (HDI = 0.933) was slightly higher than that in the US (HDI = 0.924) and significantly higher than that in Poland (HDI = 0.865).

Objective measures of social development and subjective measures of life satisfaction (happiness) naturally complement each other.

Using the Human Development Index, HDI, makes it easier to assess whether there is a real improvement in living conditions behind the increase in subjectively perceived life satisfaction. In turn, the use of measures of subjective life satisfaction offered by the economics of happiness makes it easier to assess whether progress really took place, when it is suggested by the indicator of human development [Hall and Helliwell, 2014, p. 11].

According to the renowned 2019 World Happiness Report published by Sustainable Development Solutions Network on March 20, 2019, the Nordic countries, apart from Sweden, are in the top four places in the ranking of countries whose inhabitants feel most satisfied with life. Sweden is classified in the seventh place, after the Netherlands and Switzerland (see Figure 2). The report covers 156 countries and the period 2016–2018.

Figure 2

The level of life satisfaction in Sweden compared to the other Nordic countries is presented also in Table 5.

Finally, the level of life satisfaction of Swedish residents (seventh position in the ranking) is clearly higher than that of the US (16th position in the ranking). It also significantly exceeds the level of life satisfaction of Polish citizens (position 40 in the ranking). For more detailed data see Table 6.

We will now use more traditional economic indicators. We consider the size of GDP per capita and the innovativeness of the economy measured by the number of patents to be a direct measure of economic efficiency. The level of GDP per capita is an approximate measure of the amount of goods produced by an average citizen. Roughly, an increase in GDP per capita therefore means that human needs are better met. The answer to the question of whether, over time, the goods produced are better suited to people's needs depends in turn on economic innovativeness.

All Nordic countries have a very high level of GDP per capita. According to this criterion, in 2018, Sweden ranked 11th among 36 Organization of Economic Cooperation and Development (OECD) countries. The other Nordic countries were – 4th (Norway), 7th (Denmark), 8th (Iceland) and 14th (Finland) among OECD countries, respectively (see Figure 3).

Figure 3

The place of Sweden in comparison with the other Nordic countries is detailed in Table 7.

In turn, the information in Table 8 shows that in terms of GDP per capita in 2018, Sweden lost to the US by 13.9%.

It is worth noting that the average worker in the United States spent more time than the average worker in Sweden and other Nordic countries on work during the year. For example, according to the information published in March 2019 in the Economic Report of the President: “Adults in Denmark and Norway work about 20% less, and in Sweden and Finland about 10% less than adults in the United States, in Iceland and the United States the number of working hours is similar” [White House, 2019, p. 413].

A common indicator used by economists to measure innovativeness of an economy is the number of so-called triadic patent families. These are groups of patent applications filed with all three most important patent offices in the world, protecting the same invention and originating from one country: the European Patent Office (EPO), the United States Patent and Trademark Office (USPTO), and the Japanese Patent Office (JPO) [see Sternitzke, 2009]. One of the advantages of this innovation indicator is that it measures the direct effects of Research and Development (R&D) and not the expenditure incurred to achieve these effects. According to this criterion, Sweden and other Nordic countries are among the most innovative OECD members. In 2018, Sweden ranked third in the OECD, Denmark sixth, Finland ninth, Norway 17th and Iceland 22nd (see Figure 4).

Figure 4

Detailed information on the number of triadic patent families per million inhabitants applied for by applicants from the Nordic countries in 2018 is provided also in Table 9.

Table 10, on the other hand, enables comparison of the situation in Sweden, the US, and Poland. It turns out that in 2018 the Swedish economy was almost two times as innovative as the US economy. The poor ability of the Polish economy to produce innovations (2.5 patent applications per million inhabitants) is striking, both in comparison with the US (39 patent applications per million inhabitants) and in comparison with Sweden (75.7 patent applications per million inhabitants).

The net incomes inequality measured by the Gini coefficient is very small in Sweden and other Nordic countries. It is worth noting that the income inequality in Sweden compared to the other Nordic countries is somewhat greater. At the end of 2017 Sweden ranked ninth among OECD countries (ex aequo with Hungary). Fourth was Iceland, fifth was Denmark, sixth was Norway, and eighth was Finland (see Figure 5).

Figure 5

For data on all Nordic countries, see also Table 11.

Table 12, on the other hand, enables comparison of the situation in Sweden, the US, and Poland. It turns out that the income inequalities in Sweden are much smaller than in the US (38.3% higher in the US). The official income differential in Poland is only marginally higher than in Sweden (this time the difference is 0.7%).

The average level of the so-called harmonized unemployment rate (HUR)

Harmonized unemployment rates refer to the unemployed defined as persons of working age who are not working, can work, and are trying to find work. Using the same definition of unemployment for all countries makes the results more internationally comparable than using different national definitions.

Table 13 completes this picture with additional details.

Compared to the US, the HUR in Sweden was 10.1% higher. In Poland, on the other hand, the HUR was 12.6% higher than in Sweden (see Table 14).

As regards long-term unemployment,

Long-term unemployed are those who have been unemployed for 12 months or longer. For people affected by long-term unemployment, as well as for their families, unemployment is a cause of severe mental and economic stress. The high long-term unemployment rates indicate that labor markets are not working effectively.

Figure 6

For detailed information on long-term unemployment in the Nordic countries see also Table 15.

As regards the situation in Sweden against the backdrop of the US and Poland, the relevant information is contained in Table 16. In 2018, the long-term unemployment rate in Sweden was 16.5% higher than in the US. In Poland, on the other hand, the long-term unemployment rate was 73.5% higher than in Sweden.

Compared to other countries, the level of poverty in Sweden and other Nordic countries is very low. In 2017 the poverty rate in Sweden was 9.3%, the 12th lowest among OECD countries. The other Nordic countries ranked eighth (Norway), fourth (Finland), third (Denmark) and first (the lowest poverty rate of all OECD countries), respectively (Iceland) (see Figure 7). Of note is the relatively high poverty rate in Sweden compared to the other Nordic countries.

Figure 7

For data on the poverty rate in the Nordic countries, see also Table 17.

Compared to Sweden and other Nordic countries, the poverty rate in the US was very high. In 2017, it was 17.8%, almost twice as high (91.4%) as in Sweden (see Table 18). The poverty rate in Poland was only 3.2% higher than in Sweden and amounted to 9.6%.

The level of intergenerational mobility of earnings in different countries is an approximate indicator of the intensity of the process of “inheritance” of poverty and wealth in society, which runs counter to the ideal of “equal opportunities.” It is about the transmission of income inequality from parents to children [Corak, 2013b, p. 80 – 82].

The data in Table 19 indicates that, at the beginning of the 21st century, intergenerational earnings mobility in the Nordic countries was high (compared to the other 18 countries analyzed by Corak). However, the much lower intergenerational earnings mobility in Sweden is noticeable compared to other countries in the region. Iceland has not been included due to the lack of data.

In turn, the information in Table 20 documents Sweden's significant advantage over the US in terms of the level of intergenerational mobility of earnings at the beginning of the 21st century. There are no relevant data for Poland.