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Public Policy of Sweden

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Sweden has always provided solid support for free trade, free immigration, and strong property rights. After World War II a succession of governments increased the welfare state and the tax burden, and Sweden's GDP per capita ranking fell from the 4th to 14th place in a few decades.

Sweden started to move away from this model in the 1980s, and according to the OECD and to McKinsey, Sweden has recently been relatively fast in liberalization compared to countries such as France. Deregulation-induced competition helped Sweden to halt the economic decline and restore strong growth rates in the 2000s.[80][68] The current Swedish government is continuing the trend to pursue moderate reforms. Growth has been higher than in many other EU-15 countries.

Sweden even adopted market-oriented agricultural policies in 1990. Since the 1930s, the agricultural sector had been controlled by an "iron triangle" of special interest farming organizations, politicians, and bureaucrats. This coalition formed a top-down administration that controlled prices and restricted competition, consequently hurting consumers. In the 1980s, a group of economists managed to get agricultural policy on the public agenda. Two prominent publications, The Political Economy of the Food Sector: The Case of Sweden and War Preparedness or Protectionism?, fueled the debate. An alliance with the Ministry of Finance and public choice analysis exposed the "iron triangle". In June 1990, the Parliament voted for a new agricultural policy marking a significant shift to a freer price system coordinated by competition. As a result, food prices fell somewhat. However, the liberalizations soon became moot because EU agricultural controls supervened.”

Since the late 1960s, Sweden has had the highest tax quota (as percentage of GDP) in the industrialized world, although today the gap has narrowed and Denmark has surpassed Sweden as the most heavily taxed country among developed countries. Sweden has a two step progressive tax scale with a municipal income tax of about 30% and an additional high-income state tax of 20–25% when a salary exceeds roughly 320,000 SEK per year. The employing company pays an additional 32% of an "employer's fee." In addition, a national VAT of 25% is added to many things bought by private citizens, with the exception of food (12% VAT), transportation, and books (6% VAT). Certain items are subject to additional taxes, e.g. electricity, petrol/diesel and alcoholic beverages. As of 2007, total tax revenue was 47.8% of GDP, the second highest tax burden among developed countries, down from 49.1% 2006. Inverted tax wedge - the amount going to the service worker's wallet - is approximately 15% compared to 10% in Belgium, 30% in Ireland and 50% in United States. Public sector spending amounts to 53% of the GDP. State and municipal employees total around a third of the workforce, much more than in most Western countries. Only Denmark has a larger bureaucracy (38% of Danish workforce). Spending on transfers is also high.

Eighty percent of the workforce is organized through the trade-unions which have the right to elect two representatives to the board in all Swedish companies with more than 25 employees.[84] Sweden have a relative high amount of sick leaves per worker in OECD: the average worker loses 24 days due to sickness. In December 2008 the number employed in age group 16-64 was 75.0%. The employment tendency was very strong in 2007. The positive trend continued during the first half of 2008, but the rate of increase slackened. According to SCB the unemployment rate in December 2008 was at 6.4%.

Source: Wikipedia Encyclopedia


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