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Why Does the Northern Light Shine So Brightly? Decentralisation, social capital and the economy

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Abstract

Based on institutional economics, the paper develops a new model pointing at two main reasons why Scandinavia is doing so well in economic terms, namely the level of decentralisation and social capital in its broad sense. The idea in the model is that a political system, which decentralises power, means less lobbyism because access to economically harmful rent seeking is more costly. Consequently, social capital and the trust in other people and the political leadership will increase. This model, suggesting one single social capital measure, is applied to countries in both Western and Eastern Europe. The social capital ranking results indeed show that Scandinavia (Denmark, Norway, Sweden and Finland) is among the seven top ranking countries together with Switzerland, the Netherlands and Iceland.

Suggested Citation

  • Bjørnskov, Christian & Svendsen, Gert Tinggaard, 2002. "Why Does the Northern Light Shine So Brightly? Decentralisation, social capital and the economy," Working Papers 02-15, University of Aarhus, Aarhus School of Business, Department of Economics.
    • Handle: RePEc:hhs:aareco:2002_015
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    File URL: http://www.hha.dk/nat/WPER/02-15_gts.pdf
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    1. Sjoerd Beugelsdijk & Henri L.F. de Groot & Anton B.T.M. van Schaik, 2002. "Trust and Economic Growth," Tinbergen Institute Discussion Papers 02-049/3, Tinbergen Institute.
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    Cited by:

    1. Thomas M. Fitzpatrick, 2009. "The Social And Economic Impact Of Corruption On Nations And Multinational Corporations," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    2. Thomas M. Fitzpatrick, 2007. "A Taxonomy Of Corruption," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    3. Schild, Christopher-Johannes & Wrede, Matthias, 2015. "Cultural identity, mobility and decentralization," Journal of Comparative Economics, Elsevier, vol. 43(2), pages 323-333.

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    More about this item

    Keywords

    Social capital; decentralisation; economy; Scandinavia; Switzerland; Netherlands; rent seeking; transaction costs; economic freedom; corruption;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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