The increase in support for populist politicians has led to an intensive search for explanations. A free market economy that creates winners and losers due to rapid economic transformation has been suggested as one key explanation. Reviewing the literature, we find little support that economic freedom causes populism, although trade with China has been shown to do so. In many cases populist politicians decrease economic freedom. Complementing the literature review by analyzing panel data on populist voting 1980-2020 in 33 European countries, we find that economic freedom correlates negatively with right-wing populism and is uncorrelated with left-wing populism.

All organizations need to allocate labor to production and administration. In many cases—particularly within the public sector—the optimal allocation is far from obvious. Indeed, vocal concerns have been raised about the administrative burden in several public services, not least in education. We investigate this issue using detailed registry data on all employees at Swedish universities and colleges from 2005 to 2019 and document three stylized facts. First, the group of highly educated administrators has grown rapidly, almost by a factor of seven compared with teachers and researchers. Second, the number of less-educated administrators has stayed flat. Third, the time that teachers and researchers spend on administrative tasks has been roughly constant over time. This indicates that resources have been diverted from teaching and research and raises fears of excessive administrative growth in Swedish higher education.

Within the field of innovation studies, researchers have identified systematic failures that hamper investment in R&D, innovation, and growth. Accordingly, researchers in this field often seek to provide policy recommendations on how to alleviate these failures. However, previous discussions have often been lacking considerations to the risks of political failures, meaning that policies fail to achieve their stated goals in a systematic manner. In response to this gap, this article aims to illustrate the concept of political failure and its relevance for innovation research. This is done by both discussing how political failure can impact innovation policy and by reviewing the prevalence of any discussions of political failure among top-ranked journals on innovation for the period 2010-2019, a total of 7161 articles. The results show that consideration of political failure is scarce, with a small number of papers that have a substantial analysis of political failures. If the awareness of political failures could be increased, this could lead to better policy recommendations with a more nuanced discussion of the risks and limitations of public policy.

We study competition between political parties in repeated elections with probabilistic voting. This model entails multiple equilibria, and we focus on cases where political collusion occurs. When parties hold different opinions on some policy, they may take different policy positions that do not coincide with the median voter's preferred policy platform. In contrast, when parties have a mutual understanding on a particular policy, their policy positions may converge (on some dimension) but not to the median voter's preferred policy. That is to say, parties can tacitly collude with one another, despite political competition. Collusion may collapse, for instance, after the entry of a new political party. This model rationalizes patterns in survey data from Sweden, where politicians on different sides of the political spectrum take different positions on economic policy but similar positions on refugee intake-diverging from the average voter's position, but only until the entry of a populist party.

In a representative democracy, politicians should either implement policies that voters want or policies that politicians believe are in voters long-term interest, even if voters currently oppose them. The exact balance between these goals is debatable and politicians' policy engagement can tempt them to dismiss voters' preferences and resist information counter to their own policy position. In this paper, we discuss Sweden's generous migration policy and how it can serve as an example where politicians' policy engagement led them to a overly optimistic view of the implications of welcoming a large influx of refugees. Using detailed, repeated, survey data on members of parliament, we show that Swedish politicians favored a much more generous policy toward accepting refugees than voters for a long period of time. Neither observable factors nor expert knowledge can explain this difference between voters and politicians. A more likely explanations is wishful thinking and policy engagement from politicians that continued until political competition increased.

Objectives This article aims to find country-level factors that explain the rise of populist parties in European democracies. While populism is often connected to inequality, we not that right-wing populist parties tend to thrive on fear, including fear of job loss. If flexible labor markets mean that unemployment is dedramatized because finding a new job is easier, labor market flexibility could dampen populism and inequality may be less important. Methods We run country-level fixed effects regressions on populist party vote shares in 26 European countries from 1980 to 2018. We use two different classifications of right-wing and left-wing populist parties and control for employment protection strictness as measured by OECD, Gini coefficients of disposable income, and a large set of control variables. Results Unemployment is positively associated with left-wing populism. Strict employment protection is positively associated with right-wing populism. Gini inequality of income is unrelated to (both types of) populism. Conclusion Strong employment protection and low-income inequality may not be the most efficient way to combat right-wing populism. A strategy that promotes flexible labor markets, and job upgrading may be an alternative. More research on the link between labor market institutions and (in particular, right-wing) populism is needed.

Recent micro-level studies have suggested that globalization—in particular, economic globalization and trade with China—breeds political polarization and populism. This study examines whether or not those results generalize by examining the country-level association between vote shares for European populist parties and economic globalization. Using data on vote shares for 267 right-wing and left-wing populist parties in 33 European countries during 1980–2017, and globalization data from the KOF institute, we find no evidence of a positive association between (economic or other types of) globalization and populism. EU membership is associated with a 4–6-percentage-point larger vote share for right-wing populist parties.

We investigate whether bank loans specifically designed to reduce credit constraints for small and medium-sized enterprises (SMEs) have different impacts depending on where the firm is located. Using detailed firm-level data from the state-owned Swedish bank Almi, which specifically lends to credit-constrained SMEs, and coarsened exact matching and difference-in-difference regressions, we study the causal effects of small business loans on firm growth. The results show that receiving a loan has a greater impact on firm growth for those SMEs located in major cities than for firms located in remote rural regions. This result has implications for policies that aim to increase growth in rural regions and suggests that increasing access to credit alone is not sufficient to increase employment growth.

Differentiating various types of entrepreneurs provides clues to the puzzle of why vertical or top-down policies often fail to create Schumpeterian entrepreneurship and the ecosystems where it thrives. Schumpeterian entrepreneurship is intrinsically contrarian, whereas public policy has a bias toward incremental innovation and replication of past success. If central planners knew what the next radical innovation would be, there would be no need for Schumpeterian entrepreneurs. Schumpeterian entrepreneurs create not only companies but also institutions in the entrepreneurial support system. These ever-evolving structures are too complex to design, and central planning instead reduces the space for organic institutional innovation.

Normative theories of representative democracy imply that politicians should be better informed of the consequences of a policy than ordinary voters. However, in real life, politicians can have strong convictions that risk blinding them to arguments against their positions. Policy engagement can lead politicians into motivated reasoning whereby they dismiss voters’ preferences and resist information counter to their own policy position. In this paper, we argue that Sweden’s generous migration policy is an example of a case where politicians’ policy engagement led them to motivated reasoning and to a rather optimistic view of the implications of welcoming a large influx of refugees. We show that Swedish politicians favoured a much more generous policy towards accepting refugees than their own voters. Despite limited evidence that a generous refugee policy is economically favourable in the long run, politicians on average held that belief

The large increase in economic inequality and the dismantling of the welfare state in Western democracies has been connected to the rise of populist parties. If populist voting is explained by fear and labor market insecurity and if people care more about procedural fairness than inequality of economic outcomes, national income inequality should be less important than other factors in explaining vote shares of populist parties. Using election results from 33 European countries over the 1980-2018 period, two different classifications of populist parties and three different measures of government/welfare state size, we find no relationship between country-level economic inequality, as measured by the disposable income Gini, and either right-wing or left-wing populism. An alternative hypothesis that right-wing populism is dampened by labor market flexibility and social spending is developed and shown to have empirical support.

In recent years, commercial banks have substantially reduced the number of their branch offices. We address the question of whether or not the increased distance to lenders caused by branch office closures translates into a lower credit supply for small and medium sized enterprises (SMEs). We use a unique dataset based on 33,000 loan contracts from a state-owned Swedish bank designed to support credit-constrained SMEs, and relate loan size and the interest rate to the number of nearby commercial bank offices. We use an IV strategy to account for potential endogeneity of the number of banks in a region. In line with previous studies, we find that interest rates increase with distance, while loan size decreases with distance. Thus, a larger number of local bank offices increases the local credit supply, and thereby reduces credit constraints of nearby SMEs.

Organizations, both non-profit and for-profit, needs to allocate labor for both production as well as internal administration. If this allocation is skewed towards internal administration, organizations, and especially non-profit organizations, might develop sclerosis over time with too much labor allocated to internal administration compared to production. Using detailed registry data on all individuals working at Swedish universities and colleges, we document a rapid increase in the number of qualified administrators, both in the number of employees and in total wages paid for these. This increase is not present in less qualified administration, and is mainly driven by an increase by a few professions such as communication and human resources. The increase does not lead to a significant reduction, or increase, in the time that researchers and teachers spend on administration. This in turn suggests that Swedish higher education over-allocates resources to high-skilled administration.

Incomplete capital markets and credit constraints for small and medium-sized enterprises (SMEs) are often considered obstacles to economic growth, thus motivating government interventions in capital markets. While such policies are common, it is less clear to what extent these interventions result in firm growth or to which firms interventions should be targeted. Using a unique dataset with information about state bank loans targeting credit-constrained SMEs in Sweden with and without complementary private bank loans, this paper contributes to the literature by studying how these loans affect the targeted firms for several outcome variables. The results suggest that the loans create a one-off increase in investments, with long-term, positive effects for sales and labor productivity but only for firms with 10 or fewer employees. Increased access to capital by firms can therefore produce increases in economic output but only in a specific type of firm. This insight is of key importance in designing policy if the aim is to increase economic growth.

Within the field of innovation studies, researchers have identified several market failures that hamper investment in R&D, innovation and growth in a market economy. Several policies such as government subsidies, tax deductions, soft loans, and public venture capital provided to firms that pursue R&D have therefore been recommended by researchers, in addition to regulations to increase the quality and standards of goods and services. Less attention has been paid to government failures in cases where a policy fails to achieve its stated goal, often due to conflicts between the interests of special interest groups and the public. This paper discusses the concept of government failure within an innovation policy context and why this perspective is important for policy design since it is likely that policies that aim to reduce market failures could suffer from political failures. A text analysis of all papers published in 5 leading innovation journals between 2010 and 2019, a total of 5,526 papers, indicates a lack of research about government failures, which could lead to recommendations from researches to policymakers not being successful due to political failures.

We investigate whether public policies that aim to reduce credit constraints for small and medium-sized enterprises (SMEs) have different impacts on firms located in different types of regions. Usi ...