Why Does Sweden Have So Many Start-Ups?
How a tiny country with high government spending bred a large number of vibrant young businesses
STOCKHOLM—This is a high-tax, high-spend country, where employees receive generous social benefits and ample amounts of vacation time. Economic orthodoxy would suggest the dynamics of a welfare state like Sweden would be detrimental to entrepreneurship: Studies have found that the more a country’s government spends per capita, the smaller the number of start-ups it tends to have per worker—the idea being that high income taxes reduce entrepreneurs’ expected gains and thus their incentive to launch new companies.
“I think if you want to be an innovative country, you have to give people security so they dare to take risks,” Mikael Damberg, Sweden’s minister for enterprise and innovation, told me. Birk Nilson, for instance, knew that if his company fell apart, he’d still have health coverage; he also didn’t have any student-loan debt to pay off. “Even if you fail, even if you file for bankruptcy, Sweden has a well-known and ambitious safety net,” he told me. “So I do think that taking on risk is not as daunting in Sweden as it is in the U.S.”
This story is part of a series supported by the Abe Fellowship for Journalists, a reporting grant from the Social Science Research Council and the Japan Foundation Center for Global Partnership.
Publisher (Source): Why Does Sweden Have So Many Start-Ups? – The Atlantic
Disclosure: Smita Nair Jain has nothing to disclose. She doesn’t own stock in any publicly traded companies and does not hold investments in the technology companies. She has equivalent of the American 401(k) plan in India that is automatically managed. (Updated: March 03, 2018)
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