Monday, November 27, 2006

Debate over at Harvard Professor Blog

Harvard Economist Greg Mankiw has linked to the latest Salvo in the ongoing Jeffrey Sachs/Bill Easterly debate (Sachs is a big proponent of foreign aid, Easterly is a noted skeptic).

Sachs latest response offers up the Nordic Economic Models as enviable models for developing (and I guess by implication Developed?) countries to follow. I am not so sure for reasons you can read about here.

This is what most worries me:

But Sweden retained the world´s highest taxes, generous social security systems and a heavily regulated labor market, which split the economy: Sweden is very good at producing goods, but not at producing jobs. According to a recent study of 35 developed countries, only two had jobless growth: Sweden and Finland. Economic growth in Sweden in the last 25 years has had no correlation at all with labor-market participation. (In contrast, 1 percent of growth increases the number of jobs by 0.25 percent in Denmark, 0.5 percent in the United States and 0.6 percent in Spain.) Amazingly, not a single net job has been created in the private sector in Sweden since 1950.

You can read about that here

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