THE SWEDISH COUNTER-FACTUAL (PART 1)*

Prior to 1970, Norway's GDP per capita had been lagging that of Sweden for many decades. In fact, the ratio of GDP per capita for Norway to GDP per capita for Sweden was about the same in 1970 as it had been in 1905 (the year that Norway gained its independence from Sweden), roughly 75% (see, for example, this report from Statistics Norway).

Since then, the macro economy of Norway has grown at a significantly higher rate than the economies of the other Nordic countries, including that of Sweden, both in nominal and real terms and regardless of whether differences in purchasing power are adjusted for or not.

The graph below plots the ratio of Norwegian to Swedish GDP per capita between 1970 and 2011. The graph is based on data extracted from the OECD database. As can be seen, GDP per capita for Norway is today about 150% that of Sweden. 

It is intriguing to consider the above graph a Swedish counter-factual scenario, as suggested by the this Statistics Norway analysis. How might the Swedish economy have evolved if the neighbor land to the west with its"black gold" had stayed under Swedish rule?

Or from Norwegian perspective, what would the economy of Norway look like today without the discovery of massive petrolium reserves in the North Sea in the late 1960's?

Many people in Norway - ordinary folks, politicians, and even some researchers - seem to be in denial about how important the oil industry has been for the rise to prominence of the Norwegian economy.

I will write more about this denial, the alternative hypotheses proposed, and implications for current Norwegian economic and environmental policies at a later point here at MILJØØKONOMENE.

*MILJØØKONOMENE is a Norwegian counterpart to the Environmental Economics blog. We mostly write in Norwegian and address environmental and resource issues particularly relevant to Norway. However, from time to time, we will post English language discussions that might be of broad relevance to people with general interests in environmental and resource economics. These can be found under the tag ("etiketter" on the lefthand side): English Blog.