Concerns Rise Over Slowing Productivity and Economic Growth in Sweden

Recent studies highlight significant challenges facing the Swedish economy, particularly in productivity and business dynamism. According to economists Horng Chern Wong and Anders Åkerman, productivity growth in Sweden has markedly slowed since the early 2000s. The proportion of new businesses has halved from 7% to 3.5%, indicating a decline in entrepreneurial activity. Additionally, the contribution of better resource allocation to annual productivity gains has dropped from 2.5% in the early 2000s to just 1.5% by the end of that decade.

One worrying trend is the reduced presence of "gazelles"—fast-growing companies—whose share has fallen from 4% to 3%. The report points to regulatory hurdles, taxation, market dominance by powerful players, and uncertainties that impede the growth of highly productive firms. The researchers estimate that removing barriers to capital and labor moving to more productive companies could boost productivity by 30-60%, particularly benefiting knowledge-intensive sectors.

The economists urge policymakers to review growth-restricting regulations and strike a better balance between societal benefits and fostering high-performing companies. They recommend enhancing housing mobility, increasing competition in markets dominated by strong incumbents, and reforming labor market regulations to reduce friction without undermining security.

While Sweden faces these productivity challenges, there are signs of strength in its innovation ecosystem. SSE Business Lab, the incubator at Handelshögskolan i Stockholm, recently ranked seventh among Europe's top startup hubs in the Financial Times list. Lars Strannegård, rector of SSE, emphasized the lab's vital role in building Sweden's future competitiveness, saying, “Sveriges framtida konkurrenskraft byggs här.” This highlights the startup ecosystem's growing importance despite broader economic headwinds.

Together, these findings underscore a dual narrative for Sweden: the need to address structural economic barriers while nurturing innovation hubs that can drive sustainable growth into the future.