A commonly recurring cyclical pattern is that productivity increases more quickly at the beginning of an economic upswing. Companies then normally have the capacity to increase their production with the existing resources. The need for resources then gradually increases and the companies begin to recruit new staff. Productivity growth usually falls then. When the economic cycle enters a downturn phase, productivity develops even more slowly. Another way of describing this cyclical pattern is to assume that the economy is exposed to technological shocks. This is how productivity is modelled in so-called real business cycle models. This is the case in Ramses, for instance, which is the general equilibrium model used by the Riksbank. But also by factors such as globalisation and new technology However, productivity growth did not fall back, but remained high in the latter half of the 1990s. There was only a marked reduction in connection with the bursting of the IT bubble in 2000 and in the following year productivity did not increase at all. Since then productivity has increased rapidly during the 2000s up to last year (see Figure 3). During the economic upturn in recent years it took longer before employment accelerated. Most indications are therefore that the strong productivity growth in recent years was not solely a cyclical phenomenon – it was also due to structural factors such as globalisation, use of information technology (IT), deregulation of product markets and innovations. Globalisation sharpens competition and pushes up productivity growth through a higher degree of specialisation and use of comparative advantages.

Sweden’s membership of the EU from 1995, the EU’s enlargement and the gradual intensifying of the EU’s common market have been significant factors here. New, large markets, such as China, India and the earlier planned economies in eastern Europe are being rapidly integrated into the world economy. Trade barriers and customs duties between countries have declined. Technological developments make it easier for companies to build up global trade and production networks. This has resulted in a strong increase in world trade. In Sweden, this is reflected in the fact that exports have increased from around 30 per cent of GDP in 1990 to around 50 per cent in 2006. Another tendency that is related to globalisation is that integration of companies over national borders has increased. Studies by the OECD indicate that a country's productivity increases if companies in the country have a large degree of foreign ownership. 1 Quite simply, a multinational company must be better than the local competitors in order to outweigh the handicap of operating in a foreign country. Compared with other European countries, Sweden has a high percentage of foreign-owned companies. This percentage has increased substantially since the mid-1990s. In the manufacturing industry around 40 per cent of the  1  2  Criscuolo (2005). BIS Review 12/2008  employed are now working in foreign-owned companies. The corresponding figure in the services sector is 55 per cent. 2 IT is another factor that has probably contributed to the rapid rate of increase in productivity over the past 10-15 years.