Is Sweden Efficient in Producing Human capital? The Impact of Sweden's Inefficiency in Producing Human Capital on Long-term Growth

Sammanfattning: The future wealth and competitive position of each country in the globalised world is becoming increasingly dependent on its ability to generate and absorb knowledge. Simultaneously, countries are encountering increased pressures on public balances emerging from the economic crisis and demographic trends. Hence, the importance of a well-functioning and efficient education system might be greater than ever. In this paper we address three main research questions: what is the efficiency of Sweden's education system, how has it evolved between 2000 and 2009 and what impact does it have on the long-term growth of Sweden. We employ two non-parametric approaches, namely DEA and FDH analysis, in order to investigate the first question and our results show that Sweden's education system was significantly inefficient relative to 23 other OECD countries. Specifically, the output-efficiency scores were 0.92 and 0.90 in 2000 and 2009 respectively. Using the Malmquist index, we determine that the output-efficiency of Sweden decreased by 2.07 percent between 2000 and 2009. Thirdly, by establishing a link between efficiency in producing human capital and long-term growth, we estimate that Sweden will miss out on 1.21 percentage points in long-term real GDP per capita annual growth in the future if this inefficiency persists.