On the one hand, one can argue that fewer players should result in higher prices (market-power hypothesis), but on the other hand economies of scale should give rise to lower prices (efficiency-market hypothesis). So the fact that there are only three major participants in the Swedish market does not have to be a problem from the point of view of competition as long as they are exposed to pressures from potential competitors. That presupposes, though, that it is possible for new players to enter the market. In Sweden, the municipal planning process for local site development has long been an obstacle and may well have hindered competition. The fact that food prices in Sweden are higher than in many other countries could be an indication that the first effect is the dominant one. Since 2002, however, we have seen a number of changes in the retail food sector. New foreign participants have entered the market and previously local players have branched out, shops have become bigger and the proportion of own brands has increased. •  Several foreign-owned low-price chains have set up both outside cities and in city centres. In addition, Swedish low-price chains are increasing their number of establishments. An ”unscientific” random sample that we have taken for a number of common food products – with the aim of representing the most important goods categories in the CPI – points to large  2  Source: National Institute of Economic Research. 3  Source: Fri Köpenskap.
6  See, e.g., the Swedish Competition Authority 2002a, 2002b and 2000:2. 7  Swedish Competition Authority, in cooperation with the Pensioners’ National Organisation. BIS Review 39/2005  5  this reduction being compensated for in other areas. We can also see how productivity in Sweden has grown stronger than what is usual at this stage of the business cycle. In the current debate there have been claims for some time that the Riksbank is responsible for the fact that employment has not risen faster, by not having lowered the policy rate earlier and by more, which the presently low inflation would have permitted. Like other forecasters, the Riksbank underestimated the effects on inflation of the increasingly strong global competition and productivity growth. It cannot be ruled out that employment could have been somewhat higher today if we had been able to better foresee the developments, but we are talking about small differences and far from the figures that have been mentioned in the debate. It is important to remember that the repo rate is unusually low today, which means that monetary policy is already expansionary and thus not an obstacle to consumption and investment. The main reasons behind the weak employment are rather to be found in supply factors that the Riksbank cannot influence; among other things, the incentives to start businesses and hire staff as well as the willingness of people to accept employment, move and look for new jobs.