Industrial Policy, Employer Size, and Economic Performance in Sweden

Steven J. Davis, Magnus Henrekson

NBER Working Paper No. 5237
Issued in August 1995
NBER Program(s):Labor Studies

The pre-1990 Swedish tax system strongly disfavored younger, smaller and less capital-intensive firms and sectors and discouraged entrepreneurship and family ownership of businesses in favor of institutional ownership. Credit market regulations, the national pension system, employment security laws and centralized wage setting in Sweden reinforced the distortionary impact of the tax system. We describe the relevant Swedish policies and institutional arrangements, and we explain why the attendant distortions are likely to have hampered the efficient allocation of resources, reduced productivity, and retarded economic growth and recovery. We also develop evidence on the consequences of these distortions for the size structure and industrial distribution of employment. Taking the U.S. industrial distribution as a benchmark that reflects a comparatively neutral set of policies and institutions, Sweden's employment distribution is sharply tilted away from lower wage industries, less capital-intensive industries, and industries characterized by greater employment shares for smaller firms and establishments. Compared to other OECD economies, Sweden has the lowest rate of self employment, a dominant role for larger firms, and highly concentrated ownership and control of private-sector economic activity.

download in pdf format
   (1476 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5237

Published: Industrial Policy, Employer Size, and Economic Performance in Sweden, Steven J. Davis, Magnus Henrekson. in The Welfare State in Transition: Reforming the Swedish Model, Freeman, Topel, and Swedenborg. 1997

Users who downloaded this paper also downloaded* these:
Davis and Henrekson Industrial Policy, Employer Size, and Economic Performance in Sweden
Harrison and Rodríguez-Clare w15261 Trade, Foreign Investment, and Industrial Policy for Developing Countries
Gopinath w21646 The International Price System
Banerjee, Barnhardt, and Duflo w21616 Movies, Margins and Marketing: Encouraging the Adoption of Iron-Fortified Salt
Barro w5327 Optimal Debt Management
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us