- Sweden has a comparative advantage in knowledge-intensive activities (p. 4). However, Sweden has pushed itself towards the end of its production possibilities curve. (p. 8) In order to improve, Sweden needs to expand its production possibilities curve, which means improving upon its innovation, i.e., research and development. I'm sure the OECD has R&D subsidies from the government in mind, but as I mention below, some deregulation, dismantling of bureaucracy, and decreased taxes would go a long way.
- Going off of that idea, Sweden's success hinges on high-value-added services involving high skills and intangible capital intensity (p. 19-20). This means developing a workforce able to take on those jobs. The OECD laments that Sweden's education system has declined, particularly after the implementation of decentralization (read: school vouchers) in the early 1990s (p. 26). I disagree with that assessment, particularly with using standardized testing as a basis for educational success. Finland doesn't have nationalized testing, and its education system is lauded. I can least agree that providing teachers with more flexibility and better allocating funds are aspects upon which Sweden could improve (ibid).
- Sweden has good macroeconomic, fiscal, and financial fundamentals (p. 4). It's why Sweden has a 40 percent debt-to-GDP ratio and its government assets exceed its liabilities (p. 12). Much like I did three years ago with my last analysis on Sweden, I still take issue with Sweden's higher-than-average tax rates, but it's something for Sweden to improve. Plus, I like how the OECD suggests raising the pension age (ibid).
- Sweden has some ridiculously complicated regulatory procedures, particularly with licenses and permits (p. 22). I could have told the OECD that such licensing is burdensome for those trying to start a business. Ditto for Sweden's zoning regulations (p. 23). The ability to start a business is one of those conditions that the World Bank assesses in its Ease of Doing Business Index. Removing these sort of market rigidities, particularly with making it less costly to register property (p. 25), is something the Swedish government should keep in mind.
If Sweden wants to keep its competitive and diversified business sector, as well as better economic health, it would be wise to create the sort of environment that encourages entrepreneurship and innovation. Maintaining a welfare state with a high tax burden is not the way to increase productivity in the global market, and I hope that the Swedish government is cognizant of that as it moves forward to strengthen its economy.
In addition to the OECD Economic Survey, if you're interested on reading more on Sweden's economic state, go to: