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Institutions, Markets and Enterprise

An economy does not operate in a vacuum – rather, it consists of human beings of flesh and blood, who are affected by laws and rules and have moral values and attitudes towards their fellow human beings. In order to find out how the economic problems of today can be solved it is therefore important to understand how these factors influence human behavior. We conduct research precisely on this – about the importance of values, attitudes and laws for how societies, markets and companies function

        Photo: Karl Gabor.

“Institutions rule”, economist Dani Rodrik and two colleagues wrote in 2004. By this, they meant that the laws that rule over politics, markets, and companies crucially determine how the economy works and develops. In countries where private property is protected, where freedom of contract obtains, and where democratic principles and the rule of law are established, there are more entrepreneurial initiatives creating value, and companies can grow and generate employment and pay good wages.

This is the starting point for a lot of our research – we study how laws and rules affect human and corporate behavior.

Laws and rules are referred to as formal institutions. There are also informal institutions, such as values, attitudes, morality, and norms, which are at least as important. They also matter for how markets and firms function. If a large share of the population trusts others it is, for example, less costly to do business, since a handshake suffices. If people, in general, are tolerant this might mean that the most suitable job applicants get the jobs irrespective of what group they belong to, which is beneficial for productivity.

We focus, to a large extent, on conditions for enterprise. Actual and potential business people are influenced in their decision-making by laws and rules, as well as by values, morality, and norms in society. Innovations and investment are stimulated by stable and beneficial rules, e.g., with regard to the quality of the legal system, taxation, and regulation, and by co-workers whose values and attitudes are characterized by trust, tolerance, individualism, and responsibility.

Some of our research questions are:

  • How are the incentives of companies to hire people who have a hard time getting into the labor market by employment protection laws?
  • Can the strong economic growth of Sweden from the late 1800s be explained by changed voting rules benefiting industrialists?
  • In what way has globalization affected tolerance and populism?
  • Has the spread of democracy and markets increased trust between people?
  • What explains the financial situation and decisions of immigrants?
  • Do companies work more or less well depending on the cultural background of their employees?
  • What are the consequences of the privatization of welfare services?

The following researchers are working within the program: 

Niclas Berggren, Andreas Bergh, Elina Bryngemark, Lars Calmfors, Hans Grönqvist, Martin Ljunge, Adrian Mehic, Therese Nilsson, Per Skedinger and Björn Tyrefors.

Christian Bjørnskov, Gissur Ó Erlingsson, Martin Fischer, Mats Hammarstedt, Gabriel Heller Sahlgren, Joakim Jansson, Henrik Jordahl, Daniel KnutssonLovisa Persson, Petra Persson, Per Pettersson-Lidbom and Yves Zenou are affiliated researchers. PhD student Marcos Demetry is also affiliated with the program.

Current writings
3 July 2023

Euro discussion returns due to weak Swedish krona

Swedish krona or Euro? Lars Calmfors, researcher at IFN, who investigated whether Sweden should join the single European currency on behalf of the government in the 1990s, in interviewed in Sveriges R…
Sveriges Radio
1 May 2023

Podcast: Maternal Mortality, Race and Income

The maternal mortality rate in the US is three to four times higher than in comparable rich countries. Moreover, it is much higher for African American women than for white women, as well as for low-i…