Growth and structural change in Sweden and a story of convergence Finland, 1870–1990: A story of convergence

Abstract

This article studies convergence between Finland and Sweden during the 1870-1990 period. Convergence is defined primarily as convergence in income levels and Growth rates, but the article also examines divergence and convergence in economic structure. It studies both the performance of the total economy and the manufacturing industry sector, the latter with special attention to multifactor productivity as an indicator of technical progress. The results suggest that Finnish manufacturing industry was not obviously backward in comparison with its Swedish counterpart, and that convergence, particularly during the post-war period, was influenced by falling profit shares in Swedish manufacturing industry. It is hypothesized that certain Swedish institutions may account for this.