Pension Markets in Sweden and Denmark

This chapter compares the development of pension regimes in Sweden and Denmark to demonstrate how variable political and economic constraints shaped social democratic policy choices. Social democratic parties in both countries have tried to pursue broadly similar policy strategies (tax-financed basic pensions; state-run, earnings-related pensions with publicly controlled pension funds). Swedish social democrats prevailed, at least for several decades, while their Danish counterparts turned to collective bargaining to pursue worker influence on the investment of pension capital when the legislative route was blocked. These trajectories demonstrate the role of learning and compromise by social democratic parties. In neither country were social democrats able to achieve a parliamentary majority, so legislative success required bargaining with other parties and with their trade union allies. Moreover, social democratic parties faced dilemmas concerning unanticipated pension policy legacies. Swedish social democrats had to compromise with other parties in the 1998 reform to address weaknesses in the ATP pension system. Danish social democrats faced tougher electoral constraints and have been unable to match the electoral performance of their Swedish counterparts. With the legislative route closed off, Danish social democrats lined up behind capital-funded, earnings-related pension solution based on collective bargaining.