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131. OECD Short Term Indicators Databank: January 1999

Publication Date:
01-1999
Content Type:
Policy Brief
Institution:
The Organisation for Economic Co-operation and Development
Abstract:
Health care spending In the United States public spending on health care came to 3.9% of GDP in 1980, and rose to 6.3% by 1995. Most countries saw some increase too, but a few countries saw their ratios fall, notably Sweden (8.7% to 7.1%) and Ireland (7.1% to 5.2%). The country with the highest ratio of public health care spending to GDP in 1995 was Germany, with 8.1%. US public spending on health care was about average for the 21 countries in the table, but the United States spends as much again on private healthcare. As a result US total spending on health care stood at 13.6% of GDP in 1995, significantly higher than any other OECD country.
Political Geography:
United States, Germany, and Sweden

132. Economic Structure and the Decision to Adopt a Common Currency

Author:
Jeffrey A. Frankel and Andrew K. Rose
Publication Date:
08-1996
Content Type:
Working Paper
Institution:
Institute of European Studies (IES), UC Berkeley
Abstract:
Everyone studing EMU cites the theory of Optimum Currency Areas: whether a country like Sweden should join the currency union depends on such parameters as the extent of Swedish trade with other EU members and the correlation of Sweden's income with that of other members. Few economists have focused on what we consider one of the most interesting aspects of this issue. Trade patterns and income correlation are endogenous. Sweden could fail the OCA criterion for membership today, and yet, if it goes ahead and joins anyway, could, as the result of joining, pass the Optimum Currency Area (OCA) criterion in the future. (Further, even if Sweden does not enter EMU quickly, it will be more likely to satisfy the OCA criteria in the future as a result of its recent accession to the EU.) The few economists who have identified the importance of the endogeneity of trade patterns and income correlation are divided on the nature of the relationship between the two. This is an important empirical question, which may hold the key to the answer regarding whether it is in Sweden's income interest to join EMU. We review the OCA theory, highlighting the role of trade links and income links. Then we discuss and analyze the endogeneity of these parameters. We present econometric evidence suggesting strongly that if trade links between Sweden and the rest of Europe strengthen in the future, then Sweden's income will become more highly correlated with European income in the future (not less correlated, as some have claimed). This has important implications for the OCA criterion. It means that a naïve examination of historical data gives a biased picture of the effects of EMU entry on Sweden. It also means that EMU membership is more likely to make sense for Sweden in the future than it does today.
Topic:
International Political Economy and International Trade and Finance
Political Geography:
Europe and Sweden