The Nordic countries appear to have developed a social and economic model that combines prosperity with equality. In their new article, Kjell G. Salvanes, Magne Mogstad, and Gaute Torsvik identify four key pillars of this model: (1) substantial public investment in education, health, and family services, (2) influential labour unions, (3) high public spending on social insurance, and (4) high and progressive taxation.

The authors show that the most important reason for low income inequality is equality in hourly pay. This is closely linked to high union density and strong coordination in wage bargaining, which compresses wage differences between workers. Taxes and transfers still reduce inequality, but they play a smaller role than many assume. At the same time, wealth and capital income remain highly concentrated, which makes the Nordic picture of equality more complex.

The study highlights that the Nordic model offers lessons about how institutions can balance prosperity and fairness. But the authors caution that more research is needed to understand the long-term effects on productivity and growth - and to see whether this model can be successfully replicated outside its unique historical and political context.