News

The Swedish welfare state is step-by-step heading towards a much worse crisis than in the 1990s, explains Mårten Blix, IFN, in his new book Digitalization, Immigration and the Welfare State (Edward Elgar Publishing). He writes that digital technologies are set to strengthen already existing trends towards job and wage polarization. He points out that the automation in the work place makes it increasingly difficult to maintain high income taxes and payroll taxes.

Magnus Henrekson, IFN, and Åsa Hansson, Lund University and affiliated to IFN, spoke on Wednesday at a seminar in Swedish Parliament. The Tax Committee had gathered Swedish tax experts to discuss "tax reform 25 years – its history and future." Two former ministers opened the seminar: Erik Åsbrink and Bo Lundgren. Followed by Magnus Henrekson who explained how taxation is linked to entrepreneurship and growth. Åsa Hansson sorted out the concepts of uniform and optimal taxation.

On Thursday January 19, Henrik Jordahl, IFN, presented a report he authored in collaboration with David Sundén: ”Vinstbegränsningar i välfärden” (“Profit caps in the welfare sector”, published by the Confederation of Swedish Enterprise). The report shows the socio-economic impact of introducing the kind of profit caps suggested by Illmar Reepalu in a report to the government. Jordahl explained that the bases for the Reepalu report are false. For example, there is no big money to be made from the so-called leakage of tax revenue from for-profit firms in the welfare sector. "We are talking about 6 per mille of the costs for these services," he said.

Thursday January 12, Magnus Henrekson was part of a panel discussing how the Swedish education system might move onward following the disclosure of PISA and TIMSS (international assessments of the performance of Swedish students). He explained that competition in the education market requires tests (resulting in grades) being verified by the State or a third party, measuring the knowledge of students. He compared, in this respect, schools with pharmaceutical companies: "When teachers determine the grades of the students they are teaching it is as if the pharmaceutical companies themselves would determine that different drugs should be approved. The seminar was organized by the Expert Group on Public Economics (ESO).

Research questions and focus is constantly changing. But basically the research at IFN is carried out within the framework of five research programs: Economics of Entrepreneurship, Globalization and Corporate Restructuring, Economics of the Service Sector, Economics of Electricity Markets and  Economics of Institutions and Culture."IFN is one of Sweden’s leading research environments within the field of economics," said Professor Magnus Henrekson, Managins Director of the Institute. "We undertake research relevant to policy without sacrificing scientific quality, which is the only way to win the confidence of researchers, experts, and decision-makers."

IFN's research results are published in different channels. All research is first presented in a working paper. In 2016 some 40 such papers were published at IFN. The next step is publication in a peer reviewed scientific journal. The topics of the most recent articles accepted for publication in such journals range from the attraction of consumption to social networks and the gap in the labor market between domestic and foreign-born.
 

30 years after James Buchanan was awarded the Nobel Prize in Economic Sciences Niclas Berggren, IFN, and Karin Svanborg-Sjövall, Timbro, discussed the legacy of Buchanan in a podcast turned into a stage talk. One of the issues discussed was the legal policy framework needed, in the event that a politician is driven by self-interest. Donald Trump was mentioned. Niclas Berggren explained that Buchanan's idea was to set limits to what politicians can do. "When a person of a certain nature take power it is very important that we have institutions in place that can balance the power."

IFN researchers write opinion pieces, including columns, based on research. In 2016, about 80 such articles were published, mainly in Swedish media, on topics including school, integration of immigrants and the labor market. The researchers also wrote about stock options for employees, health care, currency wars etcetera.

If you have a quiet moment during the holidays, we encourage you to explore our archives and read one or more of the articles. Most of the topics are as relevant today as when they were published.

Erik Lundin, researchers at IFN, has studied what transpired when parts of the Swedish electricity distribution sector was privatized. He explains in a short film how economies of scale resulted in: "The acquired networks increased labor efficiency by on average 18 percent, while no effect is found on the price." Since the purchases included several neighboring power grids, previously run by separate municipalities, the study shows that the entire effect can be explained by increased economies of scale, questioning the causal effect of privatization per se.

Ola Andersson’s research is about risk taking, and also about automated school choice. He talks about both of these fields in a new podcast and also about a new research project that will be launched next year. "We can to place 8500 students in a minute" he says of automated school choice. Which is a substantiel reducion in time – so far it has taken several months. In regards to risk-taking Ola Andersson’s research shows that with the "wrong" contract, we can all become too risk averse with other people's money.

Without entrepreneurship and leadership Sweden can not evolve, explained Professor Magnus Henrekson, IFN, at a seminar organized by the trade organization Almega. "People must acquire the right skills. But generally speaking, we tend yo have to much confidence in formal education." He explained that people with motivation, persistence and capacity are needed to work with the structures. "But more and more tasks can be learned on the job."

Mats Hilding, Managing Director Axelent, visited IFN on Tuesday to present his firm, its expansion and challenges. All in a vivid dialogue with researchers. He explained how Axelent, which manufactures protective equipment for e.g. industrial robots, has grown and now has subsidiaries in 10 countries. Mats Hilding told how the structure of categories of employees has changed over the years. Something that also Fredrik Heyman, IFN, talked about when he presented his research in this field.

"My guess is that we will see a slight improvement in the Swedish results," says Professor Magnus Henrekson in an interview in today's Dagens Samhälle with regard to the Pisa study, which will be presented on Tuesday. Should this be the case, he says, we still can not rest on our laurels. "We really can not be satisfied with a minor improvement." He sums up negative trends in the Swedish school system: 1) The resistance to measuring knowledge 2) The lack of education that allow students sufficient factual basis to reflect and analyze 3) That municipal governments are the principals of schools 4) That both privatly owned and publicly run schools are focusing on supplying students with high grades.

Three IFN researchers participated in SvD Financial Forum in Stockholm, November 30. Lars Calmfors introduced a section on Migration and economic growth. He explained that a survey of AER shows that employers would hire for low-level jobs if the pay were substantially lower than the current minimum wage – maybe SEK 14–15000. Following the presentation by Calmfors Andreas Bergh, IFN, and Lund University, debated integration of immigration with Tino Sanandaji, Stockholm School of Economics. Bergh said that Sweden could certainly cope with a large immigration if the wage distribution is allowed to increase. In a separate section Mårten Blix, IFN, spoke on the impact of digitization in the labor market. He argued that digitization challenges the Swedish welfare model and he fears an increase in job polarization.

What can we learn from the research on automation and digitalization? This question was answered at a seminar organized by IFN on Monday. Keynote speaker was Professor Melanie Arntz, ZEW in Mannheim and Heidelberg University. She has studied the effects of automation on labor markets in the OECD. Arntz explained that the discussion is often too doom-laden. From IFN Professor Lars Persson and Ph.D. Mårten Blix presented their research in the field. In a panel, chaired by digitization expert Sara Öhrvall, Annika Winsth, chief economist Nordea, also participated.

Mats Isaksson, head of the corporate affairs division at the Organisation for Economic Co-operation and Development (OECD), visited on Thursday IFN for a presentation of the organization. The questions were many posed by the attending researchers, concerning everything from recommendations made by the OECD and a firm's power of innovation to the allocation of responsibility in a business as well as IPOs.

Many IFN researchers have a great interest in education policy. Recently a study by Professor Magnus Henrekson, IFN, and Ph.D. student Sebastian Jävervall was showing that Swedish "school results are dropping for both the best and the worst students." The study was cited by a number of editorial writers, including Expressen, Svenska Dagbladet and Sydsvenskan. Henrik Jordahl, IFN, is the author of several reports on the school system, among these a study about municipalities’ systematic work to measure quality, which "appears to be neglected in comparison to for profit schools that have a more streamlined approach". Gabriel Heller Sahlgren, affiliated to the IFN, is the most prolific school debater. His latest report is called “Regulation and Funding of Independent Schools: Lessons from Sweden” (Fraser Institute, Canada, 2016).

Why didn’t the polls predict Donald Trump's election victory? Richard Öhrvall, IFN and Linköping University, was interviewed in a number of papers answering this question. To Dagens Nyheter he explained that focus of the US election has been on analysis of combinations of opinion polls, rather than individual polls. The incentive to make reliable but more expensive opinion polls has thus been weak. Öhrvall was also interviewed in Metro and Forskning & Framsteg. To the latter, he explained that "the evidence suggests that those with unconventional positions are less inclined to tell about them in the polls."

Professor Yves Zenou, affiliated to IFN and at Monash University, Melbourne, Australia, has been elected Fellow of the Econometric Society. Since previously Assar Lindbeck, IFN and Stockholm University, is a Fellow. The Econometric Society is an international society of academic economists interested in applying statistical tools to their field. The organization publishes three scientific journals: Econometrica, Quantitative Economics and Theoretical Economics.