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How Sweden's Unemployment Became More Like Europe's

How Sweden's Unemployment Became More Like Europe's

(p.189) 6 How Sweden's Unemployment Became More Like Europe's
Reforming the Welfare State
Lars LjungqvistThomas J. Sargent
University of Chicago Press

This chapter identifies some institutional features that might explain differences in equilibrium unemployment between a welfare state such as Sweden and a more laissez-faire economy such as in the United States. The chapter recalls recent patterns of Swedish unemployment and describes facts about European and U.S. unemployment outcomes, labor market institutions, and earnings volatility that are used to frame the theoretical and computational work that interprets outcomes in Sweden. The chapter explains higher-than-U.S. European unemployment in the 1980s and 1990s after lower-than-U.S. European unemployment in the 1950s and 1960s by bringing to light the macroeconomic implications of a force whose presence we infer from diverse sources of evidence about how the microeconomic risks facing individual workers have increased over time. The chapter concludes by discussing proposals for reforming Swedish labor market institutions.

Keywords:   Sweden, unemployment, Europe, welfare state, labor market

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