The Turnaround of Swedish Industry: Reforms, Firm Diversity and Job and Productivity Dynamics

This paper examines the Swedish industrial reorganization process that took place from 1990-2009. We argue that the early adoption of information and communication technology (ICT) in Swedish industry was a crucial element in the success of the industrial restructuring process. We also argue that several reforms in the 1990s mitigated the insider-outsider problem in the labour market and incentive problems in the Swedish business sector: the deregulation of the wage negotiation system, the deregulation of product markets, and the deregulation of the market for corporate ownership. The main prediction that results from our institutional examination is that technological change and economic reforms benefitted more productive firms and factors while punishing less effective firms and factors. We find support for our thesis by using detailed matched plant-firm-worker data.