The efficiency of Swedish regional policy

In this paper, I evaluate the efficiency of Swedish regional policy. I analyze the government’s regional policy goals and means as presented in Government Bills 1997/1998:62 and 2001/2002:4. In the light of the literature on where growth occurs as well as the results of the regional policy so far, the realism of the government’s goal of “sustainable economic growth in the whole country” could be questioned. Subsidies to companies in problematic regions have uncertain or even negative effects. The government could therefore eliminate these subsidies and replace them with venture capital loans. It could also stop its subsidies to municipal housing companies for shutting down apartments. The positive effects of the government’s tax and subsidy system for the municipalities, motivated by its distribution goal, come at the price of negative effects on incentives for a high national rate of growth. The government could replace this system with extended general subsidies. Investments in transportation projects that do not show a net benefit, such as the large Bothnia Railway in northern Sweden should be reconsidered. However, I find significant and systematic evidence that the government’s investments in regional colleges, particularly in research, have been successful.