Jobless Growth in Sweden?: A Descriptive Study

Sammanfattning: The buzzword of the 21st century concerning business cycles is the notion of jobless growth. Sweden has experienced growth in GDP without an accompanying increase in employment, causing politicians and other debaters to dub the recent recovery as jobless. The purpose of this thesis is to examine the relationship between employment and GDP and selected macroeconomic variables for Sweden and make a cross-country comparison. Two models are developed on the basis of Okun’s law. The first model is used to investigate the effect of GDP, population, cost of labour and past employment on total employment. The second model consists of employment-to-population and GDP per capita. This model is used to investigate if employment elasticity has changed over time, to explore the statistical causal relationship between GDP and employment and to make a forecast to compare with actual outcome. The employment elasticity w.r.t. GDP is about 0.7 percent for Sweden and does not change much over time. The relationship between employment and GDP is found to be strongly positive and this, together with the relatively constant employment elasticity over time, suggests that the previous situation in Sweden is due to a temporary discrepancy and not a fundamental change in the relationship.