Publication: Coping with regional inequality in Sweden : structural change, migrations and policy, 1860-2000
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2012-10
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Abstract
In many countries, regional income inequality has followed an inverted Ushaped
curve, growing during industrialisation and market integration and
declining thereafter. By contrast, Sweden’s regional inequality dropped from
1860 to 1980 and did not show this U-shaped pattern. Accordingly, today’s
regional income inequality in Sweden is lower than in other European
countries. We note that the prime mover behind the long-run reduction in
regional income differentials was structural change, whereas neo-classical and
technological forces played a relatively less important role. However, this
process of regional income convergence can be divided into two major
periods. During the first period (1860-1940), the unrestricted action of market
forces, particularly the expansion of markets and high rates of internal and
international migrations, led to the compression of regional income
differentials. In the subsequent period (1940-2000), the intended intervention
of successive governments appears to have also been important for the
evolution of regional income inequality. Regional convergence was intense
from 1940 to 1980. In this period, governments aided the convergence in
productivity among industries and the reallocation of the workforce from the
declining to the thriving regions and economic sectors. During the next period
(1980-2000), when regional incomes diverged, governments subsidised firms
and people in the declining areas.
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Convergence, Regional policy, Neo-classical growth model, Labour reallocation