Priority Areas: Social Insurance, Skill Formation and Restructuring
In order to make the program focused and manageable, we have chosen three main areas of interest: Social Insurance, Education and Structural Change. Within each of these areas, which are closely related, there are particular aspects that are considered to be special to the Nordic countries. There are also interesting differences across countries that provide a good case for comparative studies. We argue that careful empirical work on these subjects, both through country specific and comparative research, will provide a better understanding of the Nordic labor market and welfare states as well as having a large international impact.
Social insurance
The Nordic countries are well known for their well developed social insurance systems. The relative generosity of these systems is one important component underlying, by international standards, high equality of outcomes. In many cases, the social insurance systems have large similarities across the Nordic countries, but there are also interesting differences. One example at hand is the health insurance systems. It is striking that, in spite of having health insurance systems that are very similar at a first glance, there are major differences in sickness absence across countries. Norway and Sweden exhibit high and volatile absence rates compared to Denmark, Finland and most other Western countries. Clearly this is a case where careful studies of the effects of different aspects of the insurance systems can have important policy implications. In particular, this is an area where good comparative work could be extremely fruitful.
Another example is that of unemployment insurance. Also in this case there are several similarities in systems across countries but also interesting differences in both institutions and outcomes. This is also an example where the interaction between different insurance systems (e.g. health insurance and unemployment insurance) is potentially important, but largely overlooked, issue.
Skill formation
One of the most striking features of the Nordic labor markets, from an international perspective, is the relative abundance of skilled labor. This is partly reflected in relatively high levels of formal schooling, but even more pronounced in studies that use direct measures of skills. In terms of adult skills (IALS) it is clear that Nordic countries do very well both overall and at each level of education. The high levels of skills and the relative equality of skills in the Nordic countries can be argued to be one of the most important factors to ensure international competitiveness and equality of outcomes in the future.
In spite of large similarities across countries, there are also interesting differences in terms of e.g. skill level at different ages or schooling levels, and the evolution of skills over time. For example, the latest PISA results suggest that skills among teenagers are more or less average in Denmark, Norway, and Sweden while teenagers in Finland were the top performers in this study. Moreover, according to TIMSS 2003 and 1995 the performance in Norway and Sweden has deteriorated (Denmark and Finland did not participate in this study). A greater understanding of these differences across countries would greatly enhance our understanding of the driving forces behind skill formation in the Nordic countries. There are at least two areas that are particularly interesting here - the formal education system and the family. The bulk of economic research on skill formation has traditionally focused on formal education and training in the labor market. Still, a lot of skill formation takes place within the family, both before school start and later. We argue that careful empirical studies of specific countries and comparative studies can shed new light on the mechanisms underlying the Nordic record on skill formation.
Structural change
One of the most striking features of the Nordic labor markets is a low degree of wage inequality. For a long time, wage inequality in the Nordic countries has been among the lowest in the Western world. It is also the case that even if wage inequality has risen in several countries over the last two decades, the rise has been fairly limited in the Nordic countries. There are several potential reasons for why wage inequality is low - one being the supply of skills, another being the combination of strong unions and egalitarian wage policies. The current development with increasing internationalization, outsourcing and rapid technological change is certainly a challenge to equality in the Nordic labor markets. The Nordic model may have large comparative advantages beacuse the generosity of the welfare schemes (for instance unemployment insurance) and the ambitious level of active labor market policy activities in most of the Nordic countries have facilitated the structural change. But there are also considerable differences between the Nordic countries, for instance with respect to job protection and regional policies.
A better understanding of the wage setting process and structural change at the micro level would greatly help in assessing the future of the "Nordic model" in the labor market. A particularly promising research area here is the use of matched employer-employee data. Traditional research in this area has to a large extent focused on the supply side. The new matched data allows the inclusion of the demand side (firms) in the analysis of skill formation, skill pricing (wages) and structural change.
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Last Updated ( Jan 22, 2008 at 02:29 PM )
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Research Areas 