The Municipal Takeover of the School System

In 1991 the Swedish school system was transferred from the State (the national level) to the municipalities. The reform increased the size of the municipal sector by one fifth, making the reform one of the largest in recent history. Despite broad support for the reform in Parliament, the process was very slow and discussions went on for some twenty years before the final decision was made. Traditional economic theories might be less suitable to explain both the slow process and the outcome of the reform. In this paper insights from economic psychology are used as remedy for the lack of explanatory power of traditional economic theories. The paper covers the political process that preceded the reform, an evaluation of the economic consequences of the reform and an attempt to explain some of the particularities of the reform using economic-psychological theories.