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OECD Economic Surveys: Sweden 2017

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Sweden’s economy has fared well in recent years thanks to strong macroeconomic, fiscal and financial fundamentals, as well as a competitive and diversified business sector. Output has been lifted by an expanding labour force, investment and lately a pick-up in productivity. Unemployment is receding, although it remains high for vulnerable groups, notably the foreign-born. While income inequality is relatively low, it has risen more rapidly than in any other OECD country since the 1990s. Capital gains boosted top incomes, while benefits increased more slowly than wages. High labour market entry thresholds, spatial segregation, and bottlenecks in migrant settlement reduce opportunities and social mobility. Sweden is one of the world’s most gender-equal countries, even though foreign-born women are lagging behind. Women have a high employment rate, outperform men in education and are well represented in government and parliament. However, gender wage differences persist: women are under-represented on private company boards, in senior management positions, in many well-paid and influential professions and among entrepreneurs. This Economic Survey of Sweden assesses the country’s recent macroeconomic performance and prospects, and offers recommendations to foster more inclusive growth. In particular, reforms to housing, wage subsidies and migrant settlement and integration would raise the incomes and opportunities of the disadvantaged. So would a more systematic approach to benefits uprating. Better shared parental leaves would raise gender equality further. Fostering women entrepreneurship and promoting entry of women in senior management is also crucial.

Special Features: Income inequality; Gender inequality

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Income, wealth and equal opportunities in Sweden

Sweden is an egalitarian society in international comparison, and has managed to combine equity with economic efficiency. Rapidly rising inequality and relative poverty from a historical low in the 1980s partly stem from ageing, changing family structures and migration. Living standards increased for all groups, but social benefits rose less than earned income. Incomes of newly-arrived immigrants and single mothers trailed the median. Bottlenecks in the migrant settlement process are costly to migrants and society, and high entry wages further slow integration. Spatial segregation leads to school segregation and potentially reduced social mobility for the least endowed, and rental regulations reduce the scope for settling where job opportunities are the best. Fast-growing capital incomes, likely linked to increasing wealth concentration and income shifting, increased inequality. Low intergenerational income mobility in the very top of the income distribution is a concern. Social benefits should be uprated more systematically and regressive housing-related taxation reformed to strengthen redistribution. Migrant settlement and integration need to be better coordinated and adapted to individual starting points. The number of wage subsidies and their administrative complexity should be reduced to ease labour market entry. Dysfunctional rental regulations should be reformed to increase mobility and limit spatial segregation.

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