The Icelandic Welfare State:Nordic or Anglo-Saxon?

Professor Hannes H. GissurarsonNOPSA-36, Gothenburg 14 August 2014, 13–15

Lower Rate, More Revenue

1990 1995 2000 200315

20

25

30

35

40

45

50

55

0.7

0.8

0.9

1.0

1.1

1.2

1.3

Corporate Tax Rate Corporate Tax Revenue % of GDP

Corporate Tax Rate

Corporate Tax Revenue % of

GDP

Stabilisation: Inflation fell

19801982

19841986

19881990

19921994

19961998

20002002

20040

102030405060708090

Inflation in %

Sustainable Strong Pension Funds

NetherlandsIceland

SwitzerlandUnited States

United KingdomFinland

AustraliaIrelandCanada

Denmark

0 20 40 60 80 100 120 140

Pension Fund Assets 2005 % of GDP

Public Expenditure in Iceland

19881990

19921994

19961998

20002002

20042006

20082010

201205

101520253035404550

Central Government Expenditure as % of GDP

Economic Freedom in the North

1975 1980 1985 1990 1995 2000 2005 20104.5

5

5.5

6

6.5

7

7.5

8

Finland Denmark Norway Sweden Iceland

2003 Debate on “Hidden Poverty”

Eurostat on 2003–4 Poverty

Ireland

United Kingdom

Denmark

Finland

Norway

Iceland

Sweden

0 5 10 15 20 25

At- risk-of-poverty rate 2004

Olafsson’s Income Distribution

Sweden

Denmark

Finland

Norway

United Kingdom

Iceland 1995

Iceland

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4

Gini Coefficients 2004

Eurostat Income Distribution

Sweden

Denmark

Iceland

Iceland 1995

Finland

Norway

United Kingdom

0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4

Gini Coefficients 2004

Gini Coefficients after 2004

2005 2006 2007 2008 2009 2010 2011 20120

5

10

15

20

25

30

35

Top Credit Ratings Created Bubble

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

A2A1

Aa3

AaaAa1

A1

Baa3

Baa1

Bubble: 2004 Crucial Year

1992 1996 2000 2004 20080

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

External debt in millions of kronur

2004–8: Baugur Bubble

1/1/05 1/1/06 1/1/07 1/1/080

1000

2000

3000

4000

5000

6000

Loans to Baugur and re-lated companiesLoans to Exista and re-lated companiesLoans to Landsbanki main owners and related com-panies

101: Baugur Group Private Jet

101: Baugur Group Private Yacht

Seven EU countries hit harder

Latvia

Lithuania

Estonia

Finland

Slovenia

Hungary

Romania

Iceland

Ireland

0 2 4 6 8 10 12 14 16 18 20

GDP Contraction 2009 in %

All Income Groups Suffered

2004 2005 2006 2007 2008 2009 2010 2011 20120

100000

200000

300000

400000

500000

600000

700000

800000

Fixed price mean income for three quintiles

Lowest quintileThird quintileHighest quintile

Living standards relative to EU average

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013100

105

110

115

120

125

130

135

Icelandic GDP per capita as % of 28 EU states average