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Productivity Growth in the Nordic Countries

An Appraisal of Analysis, Data and Methodological Information

image of Productivity Growth in the Nordic Countries

Even small increases in a country's growth rate can result in large changes in living standards over just one generation. This key insight, which often seems to be forgotten by policymakers, is an important reason why the field of economic growth continues to be a large research field. This report provides an overview of the development of labor productivity in the Nordic countries (Denmark, Finland, Iceland, Norway, and Sweden) since the early 1980s. It also examines if data are consistent with predictions of traditional theories of growth. The analysis shows, for example, that the real wage per employee is positively related to the level of labor productivity - a finding suggesting that changes in relative standards of living have been driven by parallel changes in relative productivity.

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Introduction

In recent years, the implications of Information and Communication Technology (ICT) capital formation for the development of economies have attracted large interest and controversy. The reason for this is that the productivity resurgence in the second half of the 1990s – above all in the United States, but also in many other developed countries – was parallel to an investment boom in ICT capital equipment. In the United States, for example, this period has now been identified as the longest-everrecorded time period of sustained growth and a low and stable inflation rate. These facets, in fact, are key insights in the so-called new doctrine (new economy or new era) literature which, as usually stated, rejects the deep-rooted idea that the risk for inflation limits the possibilities for rapid and long-lasting economic growth.

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