Showing all posts tagged sweden:

New article on Sweden in the Milken Review

My latest piece on Sweden is out now in the Milken Review. This time I try to say something about how and why Sweden became the country it is today. Previously, I have focused on what happened, when did it happened and what the consequences were. Saying something about why it happened is much more difficult. In short, it is easy to paint a picture of wise intentional planning in retrospect, but that is typically not true when you look closer at what really happened. Serendipity and unintended consequences played important roles.
From the introduction:
The winding road Sweden has taken has made it difficult to say whether being more like Sweden involves increasing taxes and government intervention in the economy – or whether it means liberalization, deregulation and welfare-state retrenchment. So, before other countries try too hard to become more like Sweden, it is wise to look back at how Sweden came to be Sweden.
An example, based on the research of Thor Berger:
Historians point to the early introduction of mass public education, with the adoption of the 1842 Elementary School Act. The law, which stipulated that every parish must have at least one school, is often mentioned by contemporary politicians as a shining example of Sweden's long commitment to investment in human capital. The policy implication is seemingly clear: political decisions promoted growth early on by mandating public education. That may well be the case. But before jumping to that conclusion it is worth considering the analysis offered by the economic historian Thor Berger of Lund University. [...]
In short, education promoted economic development in Sweden, but democracy at the time did not promote education. Knowing more about what actually happened in Sweden hardly leads to clearer recommendations for other countries.

Should we use standardized inequality databases such as SWIID?

Here is my implicit point of view regarding the debate between Jenkins (2015) and Solt (2016):
Below is a table (Table 1) from Rudra (2004).
Do you notice anything strange about these Gini-coefficients? Hint: to verify inequality data, I always look at the country I know best, to see if data make sense...

[I will update this post with my thoughts eventually]

Clearly, something is wrong with the data regarding Sweden in the 1970s. The table suggests that inequality in Sweden was at its lowest level in 1975 (at 27.3) and at its highest level just a year later, in 1976 (33.1). In a country like Sweden, inequality never jumps that much from one year to another, and for sure not in 1976. Reexamining the Deininger and Squire database, it turns out that the 1975 value comes from the LIS database, whereas the 1976 value is taken from Statistics Sweden. Most likely, the latter includes capital income and the former does not. Checking other figures reveals that mosty data for Sweden are net household income, but for Brazil gross income is used, and for China the unit is the individual, not the household.

Rudra is not alone. In fact, she is better than many other papers because the inclusion of a table like Table 1 above means that the errors are possible to spot by reading the paper closely. Often, D&S data are just added to the analysis without even a simple visual inspection, which means that the analysis uses incomparable Ginis.

One of the biggest benefits of Solt's Swiid, is that all Ginis are converted to the same typ (LIS-standard), and mistakes like these are avoided.

References:
Jenkins, Stephen P. 2015. "World Income Inequality Databases: An Assessment of Wiid and Swiid." Journal of Economic Inequality 13(4):629–71.
Rudra, N. 2004. "Openness, Welfare Spending, and Inequality in the Developing World." International Studies Quarterly 48(3):683-709. doi: 10.1111/j.0020-8833.2004.00320.x.
Solt, Frederick. 2016. "On the Assessment and Use of Cross-National Income Inequality Datasets." Journal of Economic Inequality (forthcoming).