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Sweden’s Equalization Milk Cow

Sweden's complex equalization system encourages less successful areas to compound their relative disadvantage in order to maximize payments. They tend to impose higher tax levels, employ more citizens in the public sector and resist reforms in service delivery that have proven successful in the Stockholm area.
Published on April 15, 2004
Kristian Tiger
Latest News | Backgrounder | Equalization

Executive Summary

  • In Sweden, the Stockholm region is the country’s economic engine, with much higher average incomes. More government services are delivered at the local level than in most other countries.
  • The country’s complex system of equalization therefore imposes undue burdens on the capital region, whose citizens pay for most transfers to the rest of the country.
  • The transfer payments encourage less successful areas to compound their relative disadvantage in order to maximize payments. They tend to impose higher tax levels, employ more citizens in the public sector and resist reforms in service delivery that have proven successful in the Stockholm area.
  • Although intended to equalize economic conditions, the system has failed to prevent the migration of the young, entrepreneurial class to Stockholm. Social democratic support for the system is declining, especially since that party assumed power in the capital region in 2002.

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