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Abstract

How much is government spending a drag on the economic growth? Not as much as the Swedish government's costs, in the name of social security net. On one hand, government spending is discouraging investments by burdening corporates and commoners with high taxes. On the other hand, it is dragging down the buoyancy resulting from productivity growth in the private sector. The consequence is reflected in increasing unemployment. Added to the high public spending are the labour market rigidities in Sweden that help keep the employment rate down. The future too is painted gloomy, as the aged population swells - to escalate social net; jobs too are to be shortly migrated - aggravating structural unemployment. This case study discusses how the government's social expenditure, with labour market rigidities, would lead to further economic problems and also helps in analysing the economic effects of productivity-led growth.
Location:
Other setting(s):
2007

About

Abstract

How much is government spending a drag on the economic growth? Not as much as the Swedish government's costs, in the name of social security net. On one hand, government spending is discouraging investments by burdening corporates and commoners with high taxes. On the other hand, it is dragging down the buoyancy resulting from productivity growth in the private sector. The consequence is reflected in increasing unemployment. Added to the high public spending are the labour market rigidities in Sweden that help keep the employment rate down. The future too is painted gloomy, as the aged population swells - to escalate social net; jobs too are to be shortly migrated - aggravating structural unemployment. This case study discusses how the government's social expenditure, with labour market rigidities, would lead to further economic problems and also helps in analysing the economic effects of productivity-led growth.

Settings

Location:
Other setting(s):
2007

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