Sowing the Seeds of Growth: Swedish Natural Capital Growth Accounting from 1850 to 2010

Abstract: Exploring the contributing factors of economic growth is a long-standing research field in economic study. However, natural capital stock has been widely excluded from this investigation. This thesis attempts to include natural capital stock in an augmented Solow growth model utilizing Swedish national accounts from 1850 to 2010. The model found that Swedish natural capital stock played a limited role in economic growth from 1850 to 1900. However, from 1933 to 2010 Swedish natural capital stock played a significant role in economic growth. In addition to exploring Swedish natural capital stock’s role in economic development, this thesis also attempts to categorize Swedish development as either weak sustainability or strong sustainability. Through the definitions of weak sustainability and strong sustainability, as well as the results from the model, Sweden’s economic growth appears to be weak sustainability. The more robust strong sustainability criteria are not met due to the extensive net CO2 emissions by Sweden in the overall time period.