Studying Sweden’s take-off
What can we learn about economic development from studying Swedish historical data? The Ragnar Söderberg group on development and market integration is starting to look into this.
From 1800 to 1840 Sweden had, according to historical statistics, an annual per-capita growth rate of 0.6 percent, whereas in the period 1840 to 1870, this rate had increased to 1.2 percent, and accelerated to even 1.7 percent over the period 1870-1910. The country went through a transition in the late 1800 and in the beginning of 1900 that was quite tremendous and allowed to catch up in terms of development vis-à-vis other European countries. In the beginning of 1700 the economy was dominated by subsistence farming, and little of what was produced was traded and few formal markets existed. Although parts of the country saw some economic development and establishment of infrastructure and trade in the 18th century, the rapid economic transition for the country as a whole happened after the mid-19th century until World War I. The economy underwent a sweeping structural change in this period. For instance, the share of value-added in agriculture fell from about 43 percent in 1850 to about 27 percent in 1910 (see figure for historical trends in share of value added for agriculture, manufacturing and trade, business and finance).
Note: The figure shows the structural change undertaken by Sweden 1800-1940. The red dots indicate the agriculture share of value-added, the green dots show corresponding numbers for manufacturing and the blue dots show the corresponding share for trade, finance and business. The lines represents the prediction done by local polynomial curve fitting, where the span parameter is set to 0.75. The shadowed area around the lines are 95% confidence intervals.
Understanding the triggers for this remarkable transformation and the circumstances that were in place when Sweden moved from subsistence to a richer and more integrated country, is obviously interesting in and of itself. Moreover, there may be a more general value to understanding this success story, as similar circumstances and triggers may be possible to mimic in poorer societies of today.
The gold mine: Swedish historical micro data
In order to gain more knowledge and reach a better understanding of the Swedish transformation to a richer and more modern society, the Söderberg group on economic development and market integration has started a search in written manuscripts as well as in archives with historical data. We are looking into research on economic history as well as historical micro data on firms, industries, and individuals. Before the summer the group took several visits to libraries and historical archives, and from this search we confirmed that there is indeed a lot of data stored both at industry-, factory- and individual level – in fact much better data than we have seen for any other country. Some of these unique data have of course been partly studied before, and Swedish economic historians have for a long time made use of parts of these relatively high quality data to construct for instance historical national accounts. (We say relatively because there are always challenges with micro data in general, and historical data in particular, but to our knowledge, the Swedish historical data must be one of the best sources of historical data for a country in transition that exist.)
Benefit of local knowledge and resources
However, many of the Swedish micro data of the 19th century that exist have not yet been digitized, and subsequently most research efforts must first digitize the data in study, and then analyze them. The possibility of digitizing the data we need for this project, is what the group is currently looking into. We have been fortunate enough to be able to discuss the data and the possible digitization with economic historians at our own institution, Stockholm University, and other institutions, such as Lund University.
We are looking into many sources, among them texts by Gunnar Myrdal, the founder of the Institute for International Economic Studies (IIES). Among other scripts, he has written books about the historical cost of living for this period. We are also benefitting from discussions with Assar Lindbeck, who is one of our colleagues at IIES and a main figure in the history of our institute.
Combining the use of detailed historical micro data and modern techniques to analyze them
We look forward to the continuation of this work, it is exiting to look into historical sources, and it feels important to understand the history of the country at which we work, as well as trying to, when possible, generalize from the Swedish growth experience. We are in this work combining the unique detailed historical micro data with the use of modern techniques for analyzing drivers of economic growth. Hopefully this creates interesting results to be reported later.
Note: Our group has not yet come to the phase of digitizing, we are at the moment looking into what is available. In this phase we have made use of many resources and some of them are to be find very close to home, actually at the Institute for International Economic Studies (IIES). First, in the first picture you see IIES Professor, Assar Lindbeck, in a discussion on some of the historical data collection efforts with our team member Timo Boppart.
Note: The pictures shows a painting of Gunnar Myrdal who has contributed to the collection and use of Swedish historical data, and the founder of the Institute at which Ingvild Almås, Timo Boppart, Konrad Burchardi work (Hannes Malmberg just graduated from there as a doctorate student and is now a postdoctoral fellow at Stanford). The book storage on the left, took us some time to open, but it was worth the effort as it entails great treasures.