Excursion in Reality - The Nordic Model Revisited

Nordic countries have for a long time appeared at the top of global happiness and welfare comparisons. They combine this achievement with high scores in economic performance. This marvel may be due to shared history and culture, but it also manifests itself as a largely publicly financed welfare state in an otherwise liberal market economy – the Nordic Model. In reality, many aspects of the model have been drastically reformed in the past two decades. The welfare sectors themselves have in most Nordic countries been quite cost-effective according to international comparisons, but ageing of the population is expected to raise costs in all of these countries. In Denmark and Sweden, much of the emphasis has been in reforming the labor markets, while Norway, with its enormous oil wealth, is apparently mostly focusing on keeping Dutch disease at bay. Finland is about to start the biggest policy reform of her post-war history that re-shapes both the funding and organization of her health care and social service sectors, and has effects on the centralization of decision-making and, fundamentally, the welfare of the citizenry. The full extent of the reform is yet to be defined, but it is clear that it will result in a geographically more concentrated, if also more de-regulated, provision of many welfare services. This paper studies the aspects of centralization of specialised health care on the one hand, and the more cost-efficient provision of care for the elderly using a regional CGE model of Finland.