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Case Title:

Swedish Economy: Synchronised Stagnation?

Publication Year : 2007

Authors: Sai Manohar & Sardhi Kumar Gonela

Industry: General Business


Case Code: GBE0065

Teaching Note: Available

Structured Assignment: Available

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How far is government spending a drag on the economic growth? Not as much as Swedish government's costs, in the name of social security net. On one hand, government spending is discouraging investments by burdening corporates and commoners with high taxes. On the other hand, it is dragging down the buoyancy resulting from productivity growth in private sector. The consequence is reflected in increasing unemployment. Added to the high public spending are the labour market rigidities in Sweden that help keep the employment rate down. Future too is painted gloomy, as the aged population swells - to escalate social net; jobs too are to be shortly migrated - aggravating structural unemployment. This case study helps discuss how the government's social expenditure, with labour market rigidities, would lead to further economic problems and also in analysing the economic effects of productivity-led growth.

Pedagogical Objectives:

  • To understand the mechanics of 'crowding out effect'
  • To understand the relationship between corporate taxes, personal taxes and private investments
  • To analyse the effects of labour market rigidities
  • To understand the relationship between productivity-led growth (in developed economy) and employment rate.

Keywords :  Swedish Economy, Stagnation, Private Productivity, Public Spending, GDP Per Capita, GDP Growth Rate, Human Development Index, Employment Rate, Government and Business Environment Case Study, Public and Private Investment, Sweden's population structure, Welfare Costs

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