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The Nordic model and income equality: Myths, facts, and policy lessons
The Nordic countries appear to have developed a social and economic model that combines prosperity with equality. This column identifies four key pillars of the Nordic model: (1) substantial public investment in essential services, (2) influential labour unions, (3) high public expenditure on social insurance, and (4) high and progressive taxation. Equality in hourly pay, linked to high union density and strong coordination in wage bargaining, is the main reason for lower earnings inequality in the Nordics. Further research is needed to determine the implications of this for productivity and growth and whether the model is replicable.