The Nordic model is widely regarded as a benchmark. A number of comparative studies of economic and social performance have ranked the Nordics high. A common finding of cross-country comparisons is that the Nordics succeed better than other countries in combining economic efficiency and growth with a peaceful labour market, a fair distribution of income and social cohesion. The model is pointed to as a source of inspiration for other people in their search for a better social and economic system.
On the other hand, many observers around the world are amazed that “the bumble-bee can fly” – that the Nordic economies can prosper and grow in spite of the presumably weak economic incentives associated with high tax wedges, a generous social security system and an egalitarian distribution of income. Critics have been looking for inner contradictions in the model and they have questioned its sustainability. Some argue that the economic performance of the Nordic countries is simply a result of exceptional and temporary advantages, bound to disappear over time.
This report deals with the Nordic model, the reasons why it has worked in the past, and the challenges it is being subjected to in the future.