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This paper examines how employer- and worker-specific productivity shocks transmit to earnings and employment. We develop an equilibrium search model and characterize the optimal contract offered by firms. Risk-neutral firms provide partial insurance against shocks to risk-averse workers and offer contingent contracts, where payments are backloaded in good times and frontloaded in bad times. The model is estimated on matched employer-employee data from Sweden. Firms absorb persistent worker and firm shocks, with respective passthrough values of 26 and 10 percent. We evaluate the effects of redistributive policies and find that 30 percent of government insurance is undone by crowding out firm insurance. (JEL D86, H23, J24, J31, J41, J62) [ABSTRACT FROM AUTHOR]

This paper uses administrative data to analyze a large employer-borne payroll tax rate cut for young workers in Sweden. We find no effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, and a 2–3 percentage point increase in youth employment. Firms employing many young workers receive a larger tax windfall and expand right after the reform: employment, capital, sales, and profits increase. These effects appear stronger in credit-constrained firms. Youth-intensive firms also increase the wages of all their workers collectively, young as well as old, consistent with rent sharing of the tax windfall. (JEL H25, H32, J13, J23, J31, M51) [ABSTRACT FROM AUTHOR]

This paper provides a simple, yet robust framework to evaluate the time profile of benefits paid during an unemployment spell. We derive sufficient-statistics formulae capturing the marginal insurance value and incentive costs of unemployment benefits paid at different times during a spell. Our approach allows us to revisit separate arguments for inclining or declining profiles put forward in the theoretical literature and to identify welfare-improving changes in the benefit profile that account for all relevant arguments jointly. For the empirical implementation, we use administrative data on unemployment, linked to data on consumption, income, and wealth in Sweden. First, we exploit duration-dependent kinks in the replacement rate and find that, if anything, the moral hazard cost of benefits is larger when paid earlier in the spell. Second, we find that the drop in consumption affecting the insurance value of benefits is large from the start of the spell, but further increases throughout the spell. In trading off insurance and incentives, our analysis suggests that the flat benefit profile in Sweden has been too generous overall. However, both from the insurance and the incentives side, we find no evidence to support the introduction of a declining tilt in the profile. (JEL D82, E21, E24, J64, J65) [ABSTRACT FROM AUTHOR]

This paper studies whether adverse selection can rationalize a universal mandate for unemployment insurance (UI). Building on a unique feature of the unemployment policy in Sweden, where workers can opt for supplemental UI coverage above a minimum mandate, we provide the first direct evidence for adverse selection in UI and derive its implications for UI design. We find that the unemployment risk is more than twice as high for workers who buy supplemental coverage. Exploiting variation in risk and prices, we show how 25–30 percent of this correlation is driven by risk-based selection, with the remainder driven by moral hazard. Due to the moral hazard and despite the adverse selection we find that mandating the supplemental coverage to individuals with low willingness-to-pay would be suboptimal. We show under which conditions a design leaving choice to workers would dominate a UI system with a single mandate. In this design, using a subsidy for supplemental coverage is optimal and complementary to the use of a minimum mandate. (JEL D82, G22, J65) [ABSTRACT FROM AUTHOR]

This article presents a simulation model of the economy designed to study competition and market processes in Sweden. The essential idea of the model is to integrate micro activities through markets in order to get a better grasp of the behavior of conventional national accounts aggregates. The model could also be formulated to systematize micro information for a richer understanding of economic behavior at the national level. The micro unit identified here is financial decision unit and a household. The model deals only with the micro level for the business sector. It indicates how one firm interacts with all other firms and with the macro model through labor and product It should therefore be called a micro industry model contained within a macro framework. Besides the explicit combination of micro and macro levels through imitation of the market process, two features are highlighted in this paper: the determination of the firm's profit targets and the firm's responses to these targets and the specification of the search for satisfactory labor output combinations within the firm's production system. Conventional econometric methods will be used when possible to estimate parameters, especially of the macro model.

The article focuses on the sophistication of household finances in Sweden. It states that growing empirical literature has documented a cross-sectional correlation between investment mistakes and household characteristics, with wealthier, better educated households possessing more diversitized investments. It mentions that research found that underdiversification, inertia in risk taking, and the disposition effect in direct stockholding were all negatively impacted by family size, financial wealth, and education levels.

Recent theories of firm heterogeneity emphasize between-firm wage differences as a new mechanism through which trade can affect wage inequality. Using linked employer-employee data for Sweden, we show that many of the stylized facts about wage inequality found in Helpman et al. (2012) for Brazil also hold for Sweden. Much of overall wage inequality arises within sector-occupations and for workers with similar observable characteristics. One notable difference is a smaller contribution from between-firm differences in wages in Sweden, which could reflect the influence of Swedish labor market institutions in dampening the scope for variation in wages between firms through collective wage agreements. [ABSTRACT FROM AUTHOR]

Recent theoretical analysis suggests that a reduction in the cost of exporting increases the degree of assortative matching between workers and firms in export-oriented industries. Changes that reduce the cost of imports have an ambiguous impact on matching. We combine detailed Swedish matched worker-firm data from 1995-2005 with tariff data to test these hypotheses. The data cover 94 sectors subject to international competition and include all firms with at least 20 employees. Our findings strongly support the theoretical predictions. [ABSTRACT FROM AUTHOR]

This article focuses on the design choices adopted by the Swedish government for the privatization plan of their social security systems. In the 2000 U.S. Presidential campaign, George W. Bush advocated a partial privatization of the Social Security system. According to his plan, a portion of the payroll tax would be designated for individual savings accounts. At the same time as this issue was being debated in the U.S., Sweden was in the process of launching a system that is very similar to President Bush's proposal. Although Bush's plan did not get much attention in the early years of his administration, the proposal may resurface either in the U.S. or in other countries. If so, important lessons can be learned from the Swedish experience. In particular, the Swedish plan adopted an interesting mix of design choices that can now be evaluated based on three years of post-implementation experience. Although there is a large literature in economics on the design of social security systems, most of that literature is concerned with macroeconomic considerations such as funding. In contrast, there has been much less attention devoted to the details of how plans might be designed, in part because these details do not seem important from a standard economic perspective.

In the long-run equilibrium of the competitive model of the economy, interindustry wage differentials only reflect differences in nonpecuniary job attributes and worker skills between industries. The purpose of this paper is to use micro data to examine the industry wage structure in Sweden and to provide a comparison with the U.S. evidence. Such a comparison is of interest, not only because most of the available evidence on industry wage differentials is based on U.S. data, but also because of the very different institutional conditions for wage determination in the two countries. A central finding of the empirical analysis is that the magnitude of interindustry wage differentials in Sweden is much smaller than in the U.S. Most of the observed industry wage differentials in Sweden are attributed to industry differences in labor quality and working conditions. One explanation for the differences between Sweden and the U.S. may be the wage policy pursued by Swedish trade unions. A second major finding is that aggregate wage differentials provide a misleading impression of the magnitude of the correlation in industry wage differentials across countries.

We study the effect of wealth on labor supply using the randomized assignment of monetary prizes in a large sample of Swedish lottery players. Winning a lottery prize modestly reduces earnings, with the reduction being immediate, persistent, and quite similar by age, education, and sex. A calibrated dynamic model implies lifetime marginal propensities to earn out of unearned income from −0.17 at age 20 to −0.04 at age 60, and labor supply elasticities in the lower range of previously reported estimates. The earnings response is stronger for winners than their spouses, which is inconsistent with unitary household labor supply models. (JEL D14, J22, J31) [ABSTRACT FROM AUTHOR]

A number of questions concerned the limits to national planning set by the dependence on world trade of such countries as Sweden and Great Britain. While this dependence creates difficulties, it makes planning all the more imperative, not superfluous. Sweden's recent devaluation was aimed at solving the export problem; the question now is whether the higher cost of imports can be kept from having an inflationary effect. At present the government subsidizes imports for this purpose. Great Britain's export problem is more difficult than that of some other European countries because of the very large quantities of goods Great Britain is trying to push into world trade. When a country is as heavily dependent on imports as Great Britain, the need to balance its accounts must have an effect on national planning. Another group of questions rose out of the emphasis on maintaining a constant purchasing power for money. A market economy requires only the fluctuation of individual prices, which is consistent with a stable general price level. Fluctuations in individual prices are necessary to maintain the purchasing power of money, since price rises in some fields have to be offset by declines elsewhere.

The article presents a revised version of an address delivered by economist Oliver E. Williamson on the occasion of his receiving the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel (Nobel Prize in Economics) on December 8, 2009 in Stockholm, Sweden. The topic of his address was transaction cost economics.

This article presents a restated version of a lecture by economist Thomas C. Schelling, which he delivered in Stockholm, Sweden, on December 8, 2005, when he received the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel. Schelling discusses his career and his decision to place a focus of study on nuclear strategy and nuclear weapons. Schelling also discusses the history of government politics on nuclear weaponry, peaceful nuclear explosions, the Comprehensive Test Ban Treaty, and the book "Danger and Survival: Choices about the Bomb in the First Fifty Years," by McGeorge Bundy.

This study examines the effect of the late 1940s educational reform in Sweden on final educational attainment and earnings. There are two cohorts of pupils in the survey data: those born in 1948 and those born in 1953. The data for the two cohorts contain information on parental background intelligence quotient test scores, and achievement in school in grade six. In the pre-reform school system, pupils attended a basic compulsory school until the sixth grade. To evaluate the impact of the reform, years of education and level of education were considered, as measured by two binary outcomes, and log annual earnings over the years 1985 to 1996. The average effect of the reform for men and women was to increase the proportion attending through to the new compulsory level by 8.5 percentage points, and beyond that level by 2.6 percentage points, showing that the reform had an impact beyond the new compulsory level, this is consistent with the aim of the reform to improve access to higher levels of education. All changes in educational attainment taken together translate into an increase in years of education by 0.298 of a year. The overall effect of the reform on earnings at 1.42 percent was small and only significant at the 10.9-percent level. For those with unskilled fathers the reform increased earnings by 3.4 percent, which is highly significant. In terms of the point estimates, the effect is larger for the high-ability individuals but the difference is not significant. One of the striking results is the negative impact on the earnings of individuals with skilled fathers, who constitute 17 percent of the population.

This article focuses on the effects of fiscal policies on the distribution of income and wealth. There remains considerable uncertainty about the distributional consequences of fiscal policy in spite of the expansion of empirical research finance. For the purpose of this study the author examines the effectiveness of fiscal policy in reducing inequality and potential gains from further redistribution. He evaluates some of the evidence on the redistributive effects of taxes and benefits in the United States, Great Britain and Sweden. He focuses on the distribution among households and not among tax units, individuals or by type of factor income. The impact of taxes on distribution depends on a counterfactual assumption about the distribution which would be observed in the absence of taxes and benefits. The author holds the view that the evidence on the distribution of wealth is even harder to assess than that for income, partly because the data relate principally to the top of the distribution.

In a recent article in this Review Nancy Barrett draws some strong conclusions concerning the length of spells of unemployment in Sweden and the United States. Her main point is that the average duration of a spell of unemployment is much higher in Sweden than in the United States, i.e., Swedish workers take longer to find jobs once they become unemployed' although they become unemployed less often than Americans. From this she concludes that the U.S. labor market is more efficient in the sense that job seekers are matched with vacancies at a higher speed. The purpose of this note is to show the incorrectness of her assumptions and present more reliable estimates of the average duration of a spell of unemployment in Sweden. Our results indicate that the difference between the United States and Sweden in this respect is negligible. [ABSTRACT FROM AUTHOR]

The article discusses the stability problems in the Scandinavian countries including Sweden, Denmark, Norway and other European countries during the post world war. It focuses on stabilization policy carried out in Sweden during the period 1955-59, relating its application to other Scandinavian countries. It says that very little attention is paid to the need to isolate the results of the various parameter changes. Studies made during 1955 and 1956 among a number of industrial corporations of the effects on investment plans of the separate measures introduced during 1955 give interesting statistics, but the validity of the replies can very much be doubted. Another criticism of the type of economic policy is that during both the upswing and the downswing, it has involved a combination of inflationary pressure and controls of the credit and capital market. Moreover, one can look upon the retardation of production growth during 1958 as being a consequence of a certain lack of effectiveness in economic policy. The decline in output that was experienced in various sectors dependent on exports had not been counteracted sufficiently by greater production in housing and other construction activity.

The article focuses on a tax proposal introduced in Sweden, which is designed to stabilize business investment. Apart from monetary and credit measures, there may be at least two other ways in which the government can influence the rate of investment under the proposal. One consists in influencing the timing of private investment projects though special tax incentives, the government offering special tax concessions or subsidies to firms which are willing to postpone or antedate their particular investment projects, so as to fit into a more stable general pattern. This would involve a highly complicated system of tax legislation and tax administration in order to devise and administer inducements that would exert a major influence on the timing of investment projects. The Swedish provision first enacted in 1938, provides an opportunity for corporations and economic associations to reduce corporate taxable income by a maximum of 20 per cent if the amount deducted is put into one of four special investment funds, the use of which is subject to government approval. These funds have to be earmarked either for construction, for financing inventory accumulation, for purchase of machinery or equipment, or for defraying the cost of exploration and research projects in the mining industry.

The article presents the author's reply to a critique of her research on the length of unemployment spells in Sweden. than in the U.S. Their argument is unconvincing, however, for several reasons. First, it is impossible to determine whether the bias in the Swedish retrospective survey data that they use to demonstrate their point stems from an overestimate of duration (as they assume) or of the number of persons experiencing unemployment. Second, while they adjust my estimate of duration of unemployment for Sweden, they fail to make a similar adjustment for the U.S. data. If there is an error in my estimating techniques, the bias is likely to be in the same direction for both countries since the unemployment surveys are similar and are likely to have similar biases. Finally, there is other evidence that the average duration of unemployment is longer in Sweden than in the U.S. Despite the ambiguities in their analysis, however, the Axelsson, Holmlund, Löfgren piece is important in its recognition of the importance of decomposing unemployment flows into turn-over, that is, frequency of occurrence of unemployment, and duration, that is, average length per spell. These two components have different underlying determinants and hence different implications for remedial policies.

The main thesis of this paper is that measured unemployment bears a different relationship to real excess labor supply in the 1970s than it did in the 1960s. This thesis is used to explain the increase in measured unemployment in the Netherlands, Sweden, the United Kingdom, and the United States. (Author/EB)