In this paper we explore the hypothesis that the Swedish malaise comes from the interaction of the Swedish welfare state with changes in the global marketplace. External commerce can expose Swedish workers in exporting and import-competing industries to competition from low-wage foreign workers...

Using a large longitudinal data set, we study the effects of increased trade on earnings in the Swedish labor market. Earnings respond significantly to changes in industry sales, whether generated by domestic market forces or international trade: Swedish exports (imports) raise (lower) annual...