Industrial Policy, Employer Size, and Economic Performance in Sweden
Aug 01, 1995
Steven J. Davis and Magnus Henrekson

Swedish tax and regulatory policies have strongly disfavored younger, smaller and less capital-intensive firms and sectors while discouraging entrepreneurship and family ownership of businesses.

We describe the relevant Swedish policies and institutional arrangements, and we discuss their adverse consequences for resource allocation, productivity, and growth. In line with our analysis, we find that 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.