Essays on Economic Integration and Labour Demand

This dissertation consists of an introductory section and three essays investigating the effects of economic integration on labour demand by using theoretical models and by empirical analysis. The essays adopt an intra-industry trade approach to specify a theoretical framework of estimation for determining the effects of economic integration on employment. In all the essays the empirical aim is to explore the labour demand consequences of European integration. The first essay analyzes how labour-demand elasticities with own price have changed during the process of economic integration. As a theoretical result, intensified trade competition increases labour-demand elasticity, whereas better advantage of economies of scale decreases labour-demand elasticity by decreasing the elasticity of substitution between differentiated products. Furthermore, if integration gives rise to an increase in input-substitutability and/or outsourcing activities, labour demand will become more elastic. Using data from the manufacturing sector from 1975 to 2002, the empirical results provide support for the hypothesis that European integration has contributed to increased elasticities of total labour demand in Finland. The second essay analyzes how economic integration affects the impact of welfare poli-cies on employment. The essay considers the viability of financing the public sector, i.e. public consumption and social security expenses, by general labour taxation in an economy which has become more integrated into international product markets. The theoretical results of the second essay indicate that, as increased trade competition crowds out better economies of scale, it becomes more costly to maintain welfare systems financed by labour taxation. Using data from European countries for the years 1975 to 2004, the empirical results provide inconsistent evidence for the hypothesis that economic integration has contributed to the distortion effects of welfare policies on employment. The third essay analyzes the impact of profit sharing on employment as a way to introduce wage flexibility into the process of economic integration. The results of the essay suggest that, in theory, the effects of economic integration on the impact of profit sharing on employment clearly depend on a trade-off between intensified competition and better advantage of economies of scale. If product market competition increases, the ability of profit sharing to improve employment through economic integration increases with moderated wages. While, the economic integration associating with market power in turn decrease the possibilities of profit sharing with higher wages to improve employment. Using data from the manufacturing sector for the years 1996 to 2004, the empirical results show that profit-sharing has a positive impact on employment during the process of European integration, but can have ambiguous effects on the stability of employment in Finland.

Essays on Russia's Economic Transition

This study comprises an introductory section and three essays analysing Russia's economic transition from the early 1990s up to the present. The papers present a combination of both theoretical and empirical analysis on some of the key issues Russia has faced during its somewhat troublesome transformation from state-controlled command economy to market-based economy. The first essay analyses fiscal competition for mobile capital between identical regions in a transition country. A standard tax competition framework is extended to account for two features of a transition economy: the presence of two sectors, old and new, which differ in productivity; and a non-benevolent regional decision-maker. It is shown that in very early phase of transition, when the old sector clearly dominates, consumers in a transition economy may be better off in a competitive equilibrium. Decision-makers, on the other hand, will prefer to coordinate their fiscal policies. The second essay uses annual data for 1992-2003 to examine income dispersion and convergence across 76 Russian regions. Wide disparities in income levels have indeed emerged during the transition period. Dispersion has increased most among the initially better-off regions, whereas for the initially poorer regions no clear trend of divergence or convergence could be established. Further, some - albeit not highly robust - evidence was found of both unconditional and conditional convergence, especially among the initially richer regions. Finally, it is observed that there is much less evidence of convergence after the economic crisis of 1998. The third essay analyses industrial firms' engagement in provision of infrastructure services, such as heating, electricity and road maintenance. Using a unique dataset of 404 large and medium-sized industrial enterprises in 40 regions of Russia, the essay examines public infrastructure provision by Russian industrial enterprises. It is found that to a large degree engagement in infrastructure provision, as proxied by district heating production, is a Soviet legacy. Secondly, firms providing district heating to users outside their plant area are more likely to have close and multidimensional relations with the local public sector.

Essays on Finnish Economic Growth and Productivity, 1860-2005

This study examines Finnish economic growth. The key driver of economic growth was productivity. And the major engine of productivity growth was technology, especially the general purpose technologies (GPTs) electricity and ICT. A new GPT builds on previous knowledge, yet often in an uncertain, punctuated, fashion. Economic history, as well as the Finnish data analyzed in this study, teaches that growth is not a smooth process but is subject to episodes of sharp acceleration and deceleration which are associated with the arrival, diffusion and exhaustion of new general purpose technologies. These are technologies that affect the whole economy by transforming both household life and the ways in which firms conduct business. The findings of previous research, that Finnish economic growth exhibited late industrialisation and significant structural changes were corroborated by this study. Yet, it was not solely a story of manufacturing and structural change was more the effect of than the cause for economic growth. We offered an empirical resolution to the Artto-Pohjola paradox as we showed that a high rate of return on capital was combined with low capital productivity growth. This result is important in understanding Finnish economic growth 1975-90. The main contribution of this thesis was the growth accounting results on the impact of ICT on growth and productivity, as well as the comparison of electricity and ICT. It was shown that ICT s contribution to GDP growth was almost twice as large as electricity s contribution over comparable periods of time. Finland has thus been far more successful as an ICT producer than a producer of electricity. Unfortunately in the use of ICT the results were still more modest than for electricity. During the end of the period considered in this thesis, Finland switched from resource-based to ICT-based growth. However, given the large dependency on the ICT-producing sector, the ongoing outsourcing of ICT production to low wage countries provides a threat to productivity performance in the future. For a developed country only change is constant and history teaches us that it is likely that Finland is obliged to reorganize its economy once again in the digital era.

Kohti leikkaussalin tuloksellista toiminnanohjausta

Background: The aging population is placing increasing demands on surgical services, simultaneously with a decreasing supply of professional labor and a worsening economic situation. Under growing financial constraints, successful operating room management will be one of the key issues in the struggle for technical efficiency. This study focused on several issues affecting operating room efficiency. Materials and methods: The current formal operating room management in Finland and the use of performance metrics and information systems used to support this management were explored using a postal survey. We also studied the feasibility of a wireless patient tracking system as a tool for managing the process. The reliability of the system as well as the accuracy and precision of its automatically recorded time stamps were analyzed. The benefits of a separate anesthesia induction room in a prospective setting were compared with the traditional way of working, where anesthesia is induced in the operating room. Using computer simulation, several models of parallel processing for the operating room were compared with the traditional model with respect to cost-efficiency. Moreover, international differences in operating room times for two common procedures, laparoscopic cholecystectomy and open lung lobectomy, were investigated. Results: The managerial structure of Finnish operating units was not clearly defined. Operating room management information systems were found to be out-of-date, offering little support to online evaluation of the care process. Only about half of the information systems provided information in real time. Operating room performance was most often measured by the number of procedures in a time unit, operating room utilization, and turnover time. The wireless patient tracking system was found to be feasible for hospital use. Automatic documentation of the system facilitated patient flow management by increasing process transparency via more available and accurate data, while lessening work for staff. Any parallel work flow model was more cost-efficient than the traditional way of performing anesthesia induction in the operating room. Mean operating times for two common procedures differed by 50% among eight hospitals in different countries. Conclusions: The structure of daily operative management of an operating room warrants redefinition. Performance measures as well as information systems require updating. Parallel work flows are more cost-efficient than the traditional induction-in-room model.

Computer simulation of H and He effects in fusion reactor materials

Fusion power is an appealing source of clean and abundant energy. The radiation resistance of reactor materials is one of the greatest obstacles on the path towards commercial fusion power. These materials are subject to a harsh radiation environment, and cannot fail mechanically or contaminate the fusion plasma. Moreover, for a power plant to be economically viable, the reactor materials must withstand long operation times, with little maintenance. The fusion reactor materials will contain hydrogen and helium, due to deposition from the plasma and nuclear reactions because of energetic neutron irradiation. The first wall divertor materials, carbon and tungsten in existing and planned test reactors, will be subject to intense bombardment of low energy deuterium and helium, which erodes and modifies the surface. All reactor materials, including the structural steel, will suffer irradiation of high energy neutrons, causing displacement cascade damage. Molecular dynamics simulation is a valuable tool for studying irradiation phenomena, such as surface bombardment and the onset of primary damage due to displacement cascades. The governing mechanisms are on the atomic level, and hence not easily studied experimentally. In order to model materials, interatomic potentials are needed to describe the interaction between the atoms. In this thesis, new interatomic potentials were developed for the tungsten-carbon-hydrogen system and for iron-helium and chromium-helium. Thus, the study of previously inaccessible systems was made possible, in particular the effect of H and He on radiation damage. The potentials were based on experimental and ab initio data from the literature, as well as density-functional theory calculations performed in this work. As a model for ferritic steel, iron-chromium with 10% Cr was studied. The difference between Fe and FeCr was shown to be negligible for threshold displacement energies. The properties of small He and He-vacancy clusters in Fe and FeCr were also investigated. The clusters were found to be more mobile and dissociate more rapidly than previously assumed, and the effect of Cr was small. The primary damage formed by displacement cascades was found to be heavily influenced by the presence of He, both in FeCr and W. Many important issues with fusion reactor materials remain poorly understood, and will require a huge effort by the international community. The development of potential models for new materials and the simulations performed in this thesis reveal many interesting features, but also serve as a platform for further studies.

The effects of marriage partners' socio-economic positions on the risk of divorce in Finland

Väitöskirjatutkimuksen tavoitteena oli selvittää, miten aviopuolisoiden sosioekonominen asema vaikuttaa avioeroriskiin Suomessa. Tutkimuksessa käytettiin Tilastokeskuksen rekistereistä koottua aineistoa, joka koskee suomalaisten ensimmäisiä avioliittoja vuoden 1990 lopussa ja avioeroja vuosina 1991−93. Väitöskirjaan sisältyy kolme osatutkimusta. Ensimmäinen osatutkimus käsitteli avioeroriskin vaihtelua aviopuolisoiden sosioekonomisen aseman eri osatekijöiden (koulutusaste, sosiaaliryhmä, pääasiallinen toiminta, tulotaso, asunnon omistaminen ja asumisahtaus) mukaan. Kaiken kaikkiaan avioeroriski oli sitä pienempi, mitä paremmassa taloudellisessa ja sosiaalisessa asemassa aviopuolisot olivat. Esimerkiksi miehen ja vaimon korkea koulutusaste, toimihenkilöammatti, työssäkäynti (etenkin verrattuna työttömyyteen) sekä omistusasunnossa asuminen liittyivät pienentyneeseen avioeroriskiin. Vaimon sosioekonomisen aseman yhteys avioeroriskiin oli paljolti samanlainen kuin miehen aseman yhteys. Huomattavin poikkeus tähän oli, että vaimon suuret tulot lisäsivät avioeroriskiä, vaikka miehen suurilla tuloilla oli päinvastainen vaikutus. Lisäksi kotitaloustyötä pääasiallisena toimintanaan tekevillä naisilla (pääasiallisen toiminnan luokka ”muut”) oli vielä pienempi avioeroriski kuin työssäkäyvillä naisilla. Toisessa osatutkimuksessa keskityttiin aviomiehen ja vaimon aseman yhdistettyyn vaikutukseen. Selviä viitteitä siitä, että puolisoiden koulutustasojen erilaisuus lisäisi eroriskiä, ei saatu. Pareilla, joissa molemmilla oli enintään perusasteen koulutus, oli kuitenkin odotettua pienempi avioeroriski. Eroriski oli suhteellisen alhainen pareilla, joissa vaimo oli työssäkäyvä tai kotitaloustyötä tekevä ja aviomies työssäkäyvä. Eroriskiä kasvatti se, että aviomies, vaimo tai molemmat puolisot olivat työttömiä. Vaimon korkea tulotaso lisäsi eroriskiä miehen kaikilla tulotasoilla mutta erityisen voimakkaasti silloin, kun miehen tulotaso oli alhainen. Kolmanneksi selvitettiin, vaikuttaako puolisoiden sosioekonominen asema avioeroriskiin eri tavalla riippuen siitä, kauanko avioliitto on kestänyt. Tällöin havaittiin, että vähän koulutettujen ja työntekijäammateissa toimivien puolisoiden suuri eroriski rajoittuu paljolti nuorimpiin avioliittoihin. Sen sijaan esim. puolisoiden työttömyys, vaimon korkea tulotaso ja vuokra-asunnossa asuminen kasvattivat eroriskiä riippumatta siitä, kuinka kauan avioliitto oli kestänyt. Kaiken kaikkiaan eroriski oli siis sitä pienempi, mitä paremmassa taloudellisessa ja sosiaalisessa asemassa puolisot olivat. Vaimon taloudellisilla ja sosiaalisilla resursseilla näyttää kuitenkin olevan myös joitakin avioeroriskiä lisääviä vaikutuksia.

Joseph A. Schumpeter's Theory of Social and Economic Evolution : a Reconstruction and Critique

The book presents a reconstruction, interpretation and critical evaluation of the Schumpeterian theoretical approach to socio-economic change. The analysis focuses on the problem of social evolution, on the interpretation of the innovation process and business cycles and, finally, on Schumpeter s optimistic neglect of ecological-environmental conditions as possible factors influencing social-economic change. The author investigates how the Schumpeterian approach describes the process of social and economic evolution, and how the logic of transformations is described, explained and understood in the Schumpeterian theory. The material of the study includes Schumpeter s works written after 1925, a related part of the commentary literature on these works, and a selected part of the related literature on the innovation process, technological transformations and the problem of long waves. Concerning the period after 1925, the Schumpeterian oeuvre is conceived and analysed as a more or less homogenous corpus of texts. The book is divided into 9 chapters. Chapters 1-2 describe the research problems and methods. Chapter 3 is an effort to provide a systematic reconstruction of Schumpeter's ideas concerning social and economic evolution. Chapters 4 and 5 focus their analysis on the innovation process. In Chapters 6 and 7 Schumpeter's theory of business cycles is examined. Chapter 8 evaluates Schumpeter's views concerning his relative neglect of ecological-environmental conditions as possible factors influencing social-economic change. Finally, chapter 9 draws the main conclusions.

Studies on Binary Time Series Models with Applications to Empirical Macroeconomics and Finance

This thesis studies binary time series models and their applications in empirical macroeconomics and finance. In addition to previously suggested models, new dynamic extensions are proposed to the static probit model commonly used in the previous literature. In particular, we are interested in probit models with an autoregressive model structure. In Chapter 2, the main objective is to compare the predictive performance of the static and dynamic probit models in forecasting the U.S. and German business cycle recession periods. Financial variables, such as interest rates and stock market returns, are used as predictive variables. The empirical results suggest that the recession periods are predictable and dynamic probit models, especially models with the autoregressive structure, outperform the static model. Chapter 3 proposes a Lagrange Multiplier (LM) test for the usefulness of the autoregressive structure of the probit model. The finite sample properties of the LM test are considered with simulation experiments. Results indicate that the two alternative LM test statistics have reasonable size and power in large samples. In small samples, a parametric bootstrap method is suggested to obtain approximately correct size. In Chapter 4, the predictive power of dynamic probit models in predicting the direction of stock market returns are examined. The novel idea is to use recession forecast (see Chapter 2) as a predictor of the stock return sign. The evidence suggests that the signs of the U.S. excess stock returns over the risk-free return are predictable both in and out of sample. The new "error correction" probit model yields the best forecasts and it also outperforms other predictive models, such as ARMAX models, in terms of statistical and economic goodness-of-fit measures. Chapter 5 generalizes the analysis of univariate models considered in Chapters 2 4 to the case of a bivariate model. A new bivariate autoregressive probit model is applied to predict the current state of the U.S. business cycle and growth rate cycle periods. Evidence of predictability of both cycle indicators is obtained and the bivariate model is found to outperform the univariate models in terms of predictive power.

Key Factors Influencing Economic Relationships and Communication in Finnish Food Chains

The aim of this report is to discuss the role of the relationship type and communication in two Finnish food chains, namely the pig meat-to-sausage (pig meat chain) and the cereal-to-rye bread (rye chain) chains. Furthermore, the objective is to examine those factors influencing the choice of a relationship type and the sustainability of a business relationship. Altogether 1808 questionnaires were sent to producers, processors and retailers operating in these two chains of which 224 usable questionnaires were returned (the response rate being 12.4%). The great majority of the respondents (98.7%) were small businesses employing less than 50 people. Almost 70 per cent of the respondents were farmers. In both chains, formal contracts were stated to be the most important relationship type used with business partners. Although for many businesses written contracts are a common business practice, the essential role of the contracts was the security they provide regarding the demand/supply and quality issues. Relative to the choice of the relationship types, the main difference between the two chains emerged especially with the prevalence of spot markets and financial participation arrangements. The usage of spot markets was significantly more common in the rye chain when compared to the pig meat chain, while, on the other hand, financial participation arrangements were much more common among the businesses in the pig meat chain than in the rye chain. Furthermore, the analysis showed that most of the businesses in the pig meat chain claimed not to be free to choose the relationship type they use. Especially membership in a co-operative and practices of a business partner were mentioned as the reasons limiting this freedom of choice. The main business relations in both chains were described as having a long-term orientation and being based on formal written contracts. Typical for the main business relationships was also that they are not based on the existence of the key persons only; the relationship would remain even if the key people left the business. The quality of these relationships was satisfactory in both chains and across all the stakeholder groups, though the downstream processors and the retailers had a slightly more positive view on their main business partners than the farmers and the upstream processors. The businesses operating in the pig meat chain seemed also to be more dependent on their main business relations when compared to the businesses in the rye chain. Although the communication means were rather similar in both chains (the phone being the most important), there was some variation between the chains concerning the communication frequency necessary to maintain the relationship with the main business partner. In short, the businesses in the pig meat chain seemed to appreciate more frequent communication with their main business partners when compared to the businesses in the rye chain. Personal meetings with the main business partners were quite rare in both chains. All the respondent groups were, however, fairly satisfied with the communication frequency and information quality between them and the main business partner. The business cultures could be argued to be rather hegemonic among the businesses both in the pig meat and rye chains. Avoidance of uncertainty, appreciation of long-term orientation and independence were considered important factors in the business cultures. Furthermore, trust, commitment and satisfaction in business partners were thought to be essential elements of business operations in all the respondent groups. In order to investigate which factors have an effect on the choice of a relationship type, several hypotheses were tested by using binary and multinomial logit analyses. According to these analyses it could be argued that avoidance of uncertainty and risk has a certain effect on the relationship type chosen, i.e. the willingness to avoid uncertainty increases the probability to choose stable relationships, like repeated market transactions and formal written contracts, but not necessary those, which require high financial commitment (like financial participation arrangements). The probability of engaging in financial participation arrangements seemed to increase with long-term orientation. The hypotheses concerning the sustainability of the economic relations were tested by using structural equation model (SEM). In the model, five variables were found to have a positive and statistically significant impact on the sustainable economic relationship construct. Ordered relative to their importance, those factors are: (i) communication quality, (ii) personal bonds, (iii) equal power distribution, (iv) local embeddedness and (v) competition.