Fiscal Policy Responses to Future Crises

The GPRG is thrilled to share the release of our third paper: Fiscal Policy Responses to Future Crises: How Sweden Should Incorporate an Extensive Regional Dimension for the Next Crises in the Post-COVID19 Period

Sweden’s response to the COVID-19 pandemic has garnered much attention both within and outside the country. The Swedish pandemic strategy, particularly in the early stages of COVID-19, was characterized by a divergent approach to imposing regulations. While neighboring countries, as well as countries with similar characteristics located further away, locked down their societies, life in Sweden continued relatively normally: with far fewer face masks in sight and far more choice present in people’s daily lives. This controversial feature has arguably overshadowed other parts of Sweden’s pandemic strategy and taken attention away from oth- er also important topics, like the effectiveness of the deployed economic relief.

The regional economies of Sweden (herein NUTS-2) exhibit notably different characteristics. Upper Norrland is rich largely due to having a lot of tradable goods, such as metal and wood, in spite of being a rather sparsely populated region. Meanwhile, Middle Norrland has few large- scale manufacturers, with an economy structured around small businesses and tourism. Stock- holm, on the third hand, is a service economy that, despite the relative ease of moving jobs online, is vulnerable to the effects of the pandemic due to its high population density.

With this variance in the economic setup of Sweden’s regions, it becomes a question of relevance whether there is also a variance in how these regions, with their different characteristics, respond to the economic relief measures deployed in Sweden. With this variance seemingly present, GPRG advises that a clear regional dimension should be incorporated into fiscal poli- cy responses to future crises: particularly for economic relief directly aimed at businesses and households. No two crises are alike and, as the COVID-19 pandemic has made clear, even dif- ferent phases of the same crisis can come with wildly different challenges. Therefore, GPRG’s recommendations advocate for the development of flexible, resilient systems and mechanisms for wholly bringing the regional dimension into fiscal policy responses for future crises that will eventually arise in the post-COVID19 pediod.

This working paper is the third in GPRG's Election Series, a series composed of four policy papers that center around topics relevant to the upcoming Swedish elections, which take place on the 11th of September. Stay tuned for the release of the remaining reports in the series, as well as for more information about the organization's formal launch event on the 15th of September and the announcement of open positions within GPRG.

You can find the full version of the paper above.

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