Tracing the Slowdown of Labor Productivity Growth

Labor productivity in Sweden is among the highest in Europe but has been experiencing a secular decline since the GFC, similar to trends in other advanced economies. Sweden’s strong performance is supported by a skilled labor force, a competitive business environment, high R&D investments, and deep financial markets. However, evidence points to barriers to resource allocation across sectors and firms, and a multi-faceted solution is needed. Proposed reforms by the authorities’ Productivity Commission could effectively address these issues. Given the evolving structure of the Swedish economy, policies that facilitate the growth of services sector firms would be particularly beneficial.