The Swedish Paradox arises in Fast-Growing Sectors

The aim of this paper is to examine whether the previously observed gap between growth of R&D and economic performance, known as the ‘Swedish paradox’, is a general phenomenon across all sectors of the economy, or only occurs in specific industry segments. The dataset used for the analysis covers nearly the entire Swedish economy 1985-1998, divided into five broad sectors: Fast-growing industries, Slow-growing industries, Industrial outphasers, Fast- growing producer services and Other services. The growth of R&D, value added and research productivity is compared for these sectors and the largest gap between R&D and value added is located to the fast growing sectors of the economy. The Swedish paradox is therefore not necessarily a sign of weakness or deficiency of the innovation system, but rather indicates that long-term growth requires large investments in knowledge-building resources.Swedish paradox; sectors; R&D; research productivity; economic growth.

Economic growth, energy consumption and CO2 emissions in Sweden 1800-2000.

Large transformations of technologies have occurred in the Swedish economy during the last two centuries, resulting in higher income, better quality of products and changing composition of GDP. An agrarian society has given way to an industrial society and lately to a post-industrial phase. The energy supply systems have changed, from traditional energy carriers, such as firewood and muscle energy to modern carriers like coal, oil and electricity, with effects on CO2 emissions. Not only the energy supply has gone through fundamental changes, but also forest management, which affects the net emissions of CO2. The interrelations of growth, energy and CO2 are analyzed in this thesis, which uses standard calculations, relative price analyses and energy quality factors, to determine the relative effects of structural and technical changes, including changes in energy carrier composition to explain the long term delinking of energy consumption, CO2 emissions and economic growth that takes place. Technical change is the main reason of energy intensity decline. Total factor productivity gains, including improvements in technical energy efficiency, saves energy in relation to output. The most spectacular energy savings took place in the sectors transportation & communications and industry. Structural changes at the sector level tended to increase energy intensity between 1870 and 1970. No correlation was found between increasing energy quality and decreasing energy intensity, but energy quality may have had an impact on economic growth rates. The consumers’ surplus was exceptionally high during the interwar period and the three decades after the Second World War, and the total energy quality was outstanding during the latter period. The most rapid relative decline in energy intensity took place between 1970 and 2000. In this period structural changes at the sector level no longer worked to increase energy intensity and the new growth direction of the third industrial revolution saved energy in relation to output. The decrease in energy intensity after 1970 was not caused by changed patterns of foreign trade for Sweden, but by changed patterns of demand in Sweden as well as abroad. CO2 intensity, when only emissions from fossil fuels are counted, shows a pattern of either one long Environmental Kuznets’ Curve, interrupted by the Wars, or of three separate EKCs. The main determinants of this CO2 intensity are energy intensity and energy carrier composition, where the latter turned out to be most influential. The three costs involved in energy consumption, purchasing cost, handling costs and environmental costs are intended to play different roles at different income levels, with effects on energy carrier composition. The estimate of CO2 emissions and sequestration by Swedish forests showed a magnitude well in parity with emissions from fossil fuels. The aggregate CO2 emissions over the period 1800-2000 were not much altered, but the pattern of CO2 intensity was profoundly altered when forest emissions were included. Furthermore the analysis of forest management questioned the idea that firewood caused net CO2 emissions in a dynamic perspective, because the demand for thin timber dimensions stimulated a rational forestry

Baumol's disease and dematerialization of the economy

This paper argues that there is reason to be skeptical about the idea that the transition to a service economy will bring about dematerialization of production and consequent environmental improvement. This is because the shift to a service economy is an illusion in terms of real production, but is instead generated by the fall in the price of manufacturing goods relative to services, which is in turn caused by more rapid productivity growth in manufacturing than in services. This argument relies on the insights Baumol provided on the nature of the service economy and uses Swedish long-term data on relative sectoral development as an empirical illustration. On the other hand, the paper argues that there is reason to be cautiously optimistic that structural change may bring about a greening of growth, namely the changes in growth patterns sometimes labeled the third industrial revolution, which is connected to the emergence of microelectronics. Swedish CO2 emissions show a decline after 1970, which is mainly explained by a politically driven change in the mix of energy carriers, but is also related to the stabilization of energy consumption. This energy stabilization was caused by slow growth of the economy in conjunction with substantial declines in energy intensity within industrial sectors and an absence of relative growth of the heavy sectors, a growth that had marked the economy between 1870 and 1970. Microelectronics have contributed to permanently transforming the Swedish industrial sector in a lighter direction, reducing energy losses in heavy industries and stabilizing household energy consumption. So it appears as if there may be some environmental gains from this development that was initiated in the 1970s, but not from relatively more production in the service sector

Electrification and energy productivity

Efficiency in energy use is crucial for sustainable development. We use cointegration analyses to investigate the effect of electricity on energy productivity in Swedish industry 1930-1990. Electricity augmented energy productivity in those industrial branches that used electricity for multiple purposes. This productivity effect goes beyond “book-keeping effects”, i. e. it is not only the result of electricity being produced in one sector (taking the energy transformation losses) and consumed in another (receiving the benefits).Energy; electricity; sustainable development; productivity

Development blocks and the second industrial revolution – Sweden 1900-1970

The paper explores development blocks around electrification at a 14 sector level in the Swedish economy 1900-1974. We suggest that long-run cointegration relations in combination with mutually Granger-causing short-run effects form a development block. One block centred on electricity that comprises five more sectors is found. In addition we demonstrate that increasing its electricity share makes a sector grow faster, and by testing the electricity share versus the growth rates we find another development block around electricity, party overlapping the first one.development block; electricity; GPT; second industrial revolution

The Role of Energy Quality in Shaping Long-Term Energy Intensity in Europe

On the European aggregate level there is an inverted-U curve for long-term energy intensity. In the 19th century aggregate European energy intensity rose, followed by a declining trend during the 20th century. This article discusses the possible explanations for the declining trend during the 20th century and explores the role of energy quality as expressed in energy prices. For the first time a complete set of national energy retail prices covering two centuries has been constructed and used for Britain, while the energy price data previously available for Sweden until 2000 has been updated to 2009. This allows us to explore the role of energy quality in shaping long-term energy intensity. We find no relation between energy quality and energy intensity in the 19th century, while energy quality may have stimulated the declining energy intensity in Europe over the 20th century, but is not the sole or even main reason for the decline. Rather, increased economic efficiency in the use of energy services seems to have been the main driver for the decline after 1970, presumably driven by the information and communication technology

In Defense of Electricity as a General Purpose Technology

Electricity has been regarded as a typical example of a general purpose technology and important for the surge both in energy productivity and overall productivity in the American economy in the 1920s. This view was challenged by Nicholas and Moser (2004) based on patent statistics. We argue that other methods are required for studying productivity effects and propose cointegration analyses. We demonstrate a clear impact from electrification on energy productivity in those broad Swedish industrial branches that used electricity for multiple uses. This effect goes beyond mere book-keeping effects and indicates the existence of dynamic effects

North versus South: Energy transition and energy intensity in Europe over 200 years

The paper examines energy consumption in Sweden, Holland, Italy and Spain over 200 years, including both traditional and modern energy car-riers. The article is based on totally new series of energy consumption in-cluding traditional carriers along with modern sources. Our main purposes are a closer examination of the process of the energy transition in Europe and a revision of the prevailing idea of there being, over the long run, an inverted U-curve in energy intensity. Changes in energy consumption are decomposed into effects from population growth, economic growth and energy intensity. The results on energy intensity challenge previous suggestions of most scholars. An inverted U curve does not exist whenever we include traditional sources of energy in our analysis