A number of studies have shown that countries, which are more open have a greater capacity to imitate technological progress. The capacity to renew regulatory frameworks and institutions to enable the country to embrace change is an important part of this openness. Obstacles to ideas, goods, services and production factors moving freely across borders have declined during the 1990s, partly thanks to our membership of the EU, and it is reasonable to assume that this has had a positive effect on factor productivity. For a small country like Sweden, internationalisation and increased international competition are expected to lead to particularly favourable productivity effects. Various measures indicate a marked increase in the degree of internationalisation in the Swedish economy. Both the import share and the export share have risen, which means that trade and the degree of specialisation have increased. Moreover, foreign direct investment in Sweden has multiplied and it is mainly direct investment from EU countries that has increased. Although the increasing international openness has been pronounced in Sweden with, for instance, a rise of 13 percentage points in the export share of GDP during the 1990s, there are several smaller countries that have shown an even more rapid increase in the equivalent figures. This reflects the globalised world in which we live, and does not reduce the significance of openness for the development of factor productivity. Internationalisation has thus contributed to ensuring that an increasing percentage of trade and industry is exposed to competition.
If the countries of the world deliver on the commitments made in the Paris Agreement, carbon taxes may be much higher than they are today. This may make our oil production less profitable, but it will strengthen the work on climate change. A large portion of government revenues from oil production has been transferred to the Government Pension Fund Global – the oil fund – which is invested widely in equities, bonds and real estate. This has provided for good returns and risk diversification. Interest rates worldwide have fallen to low levels in recent years. The prospect of continued moderate global growth means that interest rates may remain low ahead. The estimated expected real return on the oil fund has therefore been revised down and is now quite a bit lower than 4 percent. In December, Norges Bank advised the Ministry of Finance to increase the equity allocation in the fund.2 Historically, equities have produced higher returns than bonds, but the returns have also been more volatile. A lower return on bonds is the price we pay for dampening volatility in the fund’s value. In recent years bonds have become a more effective, but also more expensive, hedge against volatility. Both conditions suggest a somewhat lower allocation to bonds. Changes in the Norway’s overall petroleum wealth also warrant a lower allocation to bonds. Apart from the oil fund, this wealth consists of oil and gas still in the ground.