Liberalization without Retrenchment: Understanding the Consensus on Swedish Welfare State Reforms

In 1980, Sweden was a highly regulated economy with several state monopolies and low levels of economic freedom. Less than twenty years later, liberal reforms turned Sweden into one of the world's most open economies with a remarkable increase in economic freedom. While there is resilience when it comes to high levels of taxes and expenditure shares of GDP, there has been a profound restructuring of Sweden's economy in the 1980s and 1990s that previous studies have under-estimated. Furthermore, the degree of political consensus is striking, both regarding the welfare state expansions that characterized Sweden up to 1980, as well as the subsequent liberalizations. Since established theories have difficulties explaining institutional change, this article seeks to understand how the Swedish style of policy making produced this surprising political consensus on liberal reforms. It highlights the importance of three complementary factors: policy making in Sweden has always been influenced by, and intimately connected to, social science ; government commissions have functioned as 'early warning systems', pointing out future challenges and creating a common way to perceive problems; and, as a consequence, political consensus has evolved as a feature of Swedish style of policy making. The approach to policy making has been rationalistic, technocratic and pragmatic. The article concludes that the Swedish style of policy making not only explains the period of welfare state expansion – it is also applicable to the intense reform period of the 1980s and 1990s.     

When is a Reminder Enough? Text Message Voter Mobilization in a European Context

Sending text messages reminding people to vote has only been examined as a mobilization tool in three studies, two of them done in the United States. The results from these studies are mixed. We investigate this tool’s effectiveness using a field experiment in a different context, municipal elections in Norway. We find strong mobilization effects among groups traditionally low in participation (immigrants and youth voters). Young native Norwegians show an intent-to-treat (ITT) effect of 4.58% points, foreign nationals who have recently established Norwegian residency show an ITT effect of 2.93% points, and among immigrants who have lived in Norway for 7 years or more the treatment effect is 2.7% points. Even among native Norwegian voters over 30, with a baseline turnout of 73%, text messages generate a 0.96% points increase in turnout.

     

The Universal Welfare State: Theory and the Case of Sweden

In the existing literature on welfare state typologies, the concept of the universal welfare state is not defined precisely enough to allow for comparisons of universality over time and between countries. In this paper, I discuss some problems with the way the term 'the universal welfare state' has been used and I suggest possible solutions. Among other things, I propose that the term 'universality' be used to describe the provision of a specific welfare benefit independently of individual income and/or other individual characteristics. It should also be used to describe the coverage of welfare benefits rather than their size. Based on the theoretical discussion, a number of possible indicators of universality are applied to the case of Sweden in the 1990s. The conclusion is that, despite its economic crisis, universality in Sweden did not decrease.     

Introduction 15th annual conference of the european association of law and economics, utrecht, the netherlands, september 1998

This issue of the International Review of Law and Economics contains a selection of papers presented at the 15^th Annual Conference of the European Association of Law and Economics (EALE). It was the first time that the annual conference of the EALE was held in the Netherlands. It took place at Utrecht, in September 1998.Approximately 40 papers were presented at the conference. Many of these papers were submitted to this issue of the International Review of Law and Economics, and we were obliged to face the difficult task of selection. In this task we were helped by anonymous referees, who deserve much credit for their delicate task. The issue opens with the text of the invited lecture by Chief Judge Richard Posner on “Employment Discrimination: Age Discrimination and Sexual Harassment.” After this lecture, seven refereed papers are published. They cover a wide range of topics and include theoretical and empirical approaches.The first two articles are empirical studies. In their article “The Dynamics of Pretrial Negotiation in France: Is there a Deadline Effect in the French Legal System?,” Bruno Deffains and Myriam Doriat provide empirical evidence on pretrial negotiation in France with the primary goal being to determine whether there is a deadline effect. Theoretical and experimental studies generally show that in pretrial litigation most claims are settled just before the negotiation deadline, i.e., at the door of the court. Using data on civil law conflicts in France, the authors demonstrate that although the out-of-court settlement rate is relatively low, a deadline effect exists in the French legal system. The article complements the theoretical and experimental literature in the field of pretrial negotiation and provides additional insights into the functioning of the legal system.The article “Modeling Crime and the Law Enforcement System” by Frank van Tulder and Abraham van der Torre presents a macroeconomic model of the Dutch criminal justice system. The empirical estimations show that demographic, social, and economic factors and the results of the law enforcement system influence the number of crimes. It is found that a rise in the clear-up rate reduces the crime rate, whereas the average term of imprisonment has a negative impact on violence. A growth in the number of young men, divorced persons, unemployed, drug addicts, and motor vehicles—each per capita—and a rise in income inequalities have a boosting effect on one or more types of crime.The third article by Michael Faure and Paul Fenn is concerned with the costs and benefits of making liability for accidents retroactive, given the availability of liability insurance. The authors distinguish between the injurer’s perceived risk that the standard of care applied by the courts will differ from his chosen level of care, where this perceived risk is based on precedent or current practice, and the genuine uncertainty that the standard of care may change in the future as a result of unknown developments in the technology of care. While the injurer’s probability distribution over liability may be the same in each of these cases, he may be far less confident about the reliability of the probability distribution as a guide to choice in the latter case. In principle, the risk of liability arising from an unknown standard of care could be transferred to a liability insurer through the purchase of occurrence coverage. However, in addition to the usual source of difficulty for insurance markets as a result of information asymmetry, insurers also may have distaste for ambiguity. The authors show that this could in some circumstances lead to market failure in the provision of occurrence policies. These welfare losses from inefficient risk sharing as a consequence of retroactivity must, therefore, be set against the potential welfare gains from improved incentives for injurers to seek out information on care technology, as well as the concerns over distributive justice.In their article “Unitary States and Peripheral Regions: A Model of Heterogeneous Spatial Clubs” Jean-Michel Josselin and Alain Marciano develop an analytical framework for understanding the limits of constitutional unity. Their microeconomic model of unitary states deals with two kinds of heterogeneity. First, preference distance or physical distance account for decreasing net benefits from expansion. Second, heterogeneity may involve a discontinuity in the spatial pattern of preferences: “Peripheral behaviors” threaten unity. The authors integrate such behaviors into the model and draw some lessons as to the nature of an optimal constitutional area, discussing in particular the status of peripheral regions.The fifth article by Benito Arrunada, entitled “The Provision of Non-Audit Services by Auditors: Let the Market Evolve and Decide,” searches for and defines efficient regulation of the provision of non-audit services by auditors to their audit clients. From an examination of the particular problems posed by these services, it is concluded that they reduce total costs, increase technical competence, and stimulate more intense competition. Furthermore, they do not necessarily damage auditor independence or the quality of non-audit services. This assessment leads to recommending that legislative policy should aim at facilitating the development and use of the safeguards provided by the free action of market forces. Particular emphasis is placed on the role played by fee income diversification and the enhancement, through disclosure rules, of market incentives to diversify. A rule of mandatory disclosure of client diversification is examined to facilitate the task of the market with regard to achieving the optimal degree of auditor independence.In the next article, Antony Dnes applies the economic analysis of law to examine recent proposals in England and Wales for the reform of the law affecting financial settlement following divorce. Two specific measures have been proposed to reduce judicial discretion: a mathematical formula (such as a rebuttable presumption to divide equally the whole pool of assets during divorce) to be applied in the absence of agreement between the parties, or the enforcement of prenuptial agreements. The author concludes that these measures should be welfare improving but would need to be forward looking and applied to marriages, rather than divorces.The last article by Niva Elkin-Koren and Eli Salzberger provides a look at the changing world of law with the emergence of cyberspace from the perspective of the economic approach to law. The authors argue that the Chicago paradigm cannot be of much help to analyze law in and of cyberspace. While cyberspace reduces the traditional causes of monopolies, it introduces new types of monopolies that are the consequence of control over technologies rather than of price and demand curves. Second, the strict correlation between markets and states does not exist in cyberspace. The authors equally point at the weaknesses of transaction cost analysis. The Coaseian analysis assumes a given state of technology and overlooks the correlation and reciprocity between technological developments and legal rules. The authors consider neoinstitutional law and economics as the most suitable framework for examining the changing world of cyberspace, but they suggest some refinements. Cyberspace invites a reassessment of the borders between markets and hierarchies and poses special challenges to the paradigmatic assumption of rational behavior.     

Do Labour Parties Suffer from Declining Turnout? Evidence from Norwegian Local Elections

The argument that declining voter turnout harms social democratic parties has received little support in research on national elections, but partisan consequences of declining turnout in local elections has been less explored. Norwegian local elections – where both turnout and support for the Labour Party have declined since the early 1960s – are used as a test case. Analyses of aggregate data gave no systematic support for the hypothesis that Labour suffers from lower turnout. Declining turnout and declining Labour Party vote were not causally related, and the correlation between the two variables seemed to be the result of other long-term social changes. Analyses of survey data pointed to three flaws in the premises on which the hypothesis was based. First, the effect of declining turnout on the biased class composition of the abstainers was ambiguous. Second, the Norwegian Labour Party suffers less from differential turnout than before as a result of declining class voting. Third, the Labour Party may suffer from a demobilisation of the working class, but the party may also benefit from a demobilisation of the young.     

Notes on Contributors

In the 1990s, several public corruption scandals were uncovered in Sweden. This article focuses specifically on local corruption, and our purpose is to examine whether a case can be made that problems of public corruption in Swedish municipalities have increased. By applying instruments from the institutional rational choice framework, we reach the conclusion that there are indeed reasons to suspect that retrenchment initiatives and organisational reforms over the last two decades, often labelled ‘new public management’, have increased the risk of corruption. Although hard empirical data do not yet exist, the suspicion that public corruption in Swedish municipalities may have become an increasing problem cannot be disregarded. Hence, we conclude by calling for further empirical research in this field.