In this dissertation, the Swedish transport aid constitutes a case study with the aim of empirically testing the presence of institutional path dependency. In New Institutional Economics the concept institutional path dependency is used for analyzing why institutions that do not promote growth are developed even when better solutions are available. In this study, institutional path dependency is defined in the following way: institutional path dependency is when new institutional conditions develop in a way that maintains an economic and social practice within the sector of the economy that the institutional condition regulates.
The transport aid was introduced in 1971 and is a part of Swedish regional policy. The transport aid is allocated to certain goods-producing companies in northern Sweden in order to subsidize their cost of transportation. The aim was that these companies would strengthen their ability to compete in markets in southern Sweden and abroad.
In order to perform a test of the existence of path dependency, three criteria for path dependence were defined. The first of these criteria is that new institutional conditions arise with a maintained practice within the regulated sector. The second criterion for path dependency is that the institutional condition subsists when there are other alternatives which are better and well-known from the point of view of public economy. A third criterion for path dependency is that an institutional condition is given a new legitimacy when interest groups state new motives for it.
The study has shown that a practice from the previous traffic policy has lived on in the institutional condition of the transport aid, through a continued subsidization of the cost of transportation similar to a historical tradition in early railway policy (for example in the Norrland tariff). A relatively large part of the transport aid has in practice been subsidizing transports of relatively unprocessed goods, which was a reason for the criticism that the transport aid received in previous studies. A practice from earlier traffic policy, which entailed leveled costs of transportation, has been difficult to combine in practice with goals from regional policy that have emphasized growth and industrial development. This indicates a path dependent development of the transport aid, since it's practice seems to be related to another "path" than main stream regional policy.
Since the transport aid was continuously criticized in parliamentary reports and debates for conserving the economic structure in the support area and for distorting the competition on the transport market, there was probably a certain pressure to change the transport aid or replace it with other measures that were more neutral with regard to competition. This pressure of change was brought to a head in the parliamentary resolution from 1990, when the Government suggested radical changes in the design and organization of the transport aid. The Government bill was however rejected by Parliament, and the transport aid continued in the same form as before. Therefore, the transport aid has not followed changes in regional policy at large, neither with regard to organization nor formal goals, in spite of the fact that both the Government and the officials in the Transport Council (the administrative organization) have urged on an adjustment of the transport aid to fit the general direction of the regional policy at large. If the general direction of the regional policy in the 80s and 90s reflects a more growth oriented economic policy, then the transport aid has resisted institutional change, in spite of the fact that better and more well-known alternatives have existed with regard to promoting growth. The second criterion for institutional path dependency may therefore be considered fulfilled.
Interest groups have on several occasions expanded the base for legitimacy of the transport aid by presenting new arguments to support it. One example of expanded legitimacy is that the transport aid was directed towards small and medium-sized companies in the 1980s. Such arguments were not presented when the transport aid was introduced in 1970, but was later emphasized by members of the Center Party and the Social Democratic Party. An interesting aspect of this institutional change is that the new motives also were characterized by ideological preferences for equality, since the transport aid with the help of this change would be able to support small firms in their competition with large firms in the same sector. This supports the assertion that the legitimacy of the transport aid has been derived from informal ideological preferences for equality rather than ideological preferences for growth, though the formal goals for the transport aid have been growth related. The conclusion is consequently that interest groups over time have managed to establish a stronger ideological legitimacy for the transport aid. All three criteria for institutional path dependency can therefore be considered fulfilled in the case of the transport aid.
Umeå: Umeå universitet , 1999. , 215 p.