Studies on Wage Differentials and Labour Market Transitions

This thesis consists of four studies. The first study examines wage differentials between women and men in the Finnish manufacturing sector. A matched employer-employee data set is used to decompose the overall gender wage gap into the contributions of sex differences in human capital, labour market segregation, and residual within-job wage differentials. The topic of the second study is the relationship between the extended unemployment benefits and labour market transitions of older workers. The analysis exploits a quasi-experimental setting caused by a change in the law that raised the eligibility age of workers benefiting from extended benefits. Roughly half of the unemployed workers with extended benefits are estimated to be effectively withdrawn from labour market search. The risk of unemployment declined and the re-employment probability increased among the age groups directly affected by the reform. The third study provides an empirical analysis of a structural equilibrium search model. Estimation results from various model specifications are compared and discussed. The last study is a methodological study where the difficulties of interpreting the results of competing risks hazard models are discussed and a solution for a particular class of models is proposed. It is argued that a common practice of reporting the results of qualitative response models in terms of marginal effects is also useful in the context of competing risks duration models.

Essays on Labor Market Frictions, Technological Change and Macroeconomic Fluctuations

The dissertation consists of an introductory chapter and three essays that apply search-matching theory to study the interaction of labor market frictions, technological change and macroeconomic fluctuations. The first essay studies the impact of capital-embodied growth on equilibrium unemployment by extending a vintage capital/search model to incorporate vintage human capital. In addition to the capital obsolescence (or creative destruction) effect that tends to raise unemployment, vintage human capital introduces a skill obsolescence effect of faster growth that has the opposite sign. Faster skill obsolescence reduces the value of unemployment, hence wages and leads to more job creation and less job destruction, unambiguously reducing unemployment. The second essay studies the effect of skill biased technological change on skill mismatch and the allocation of workers and firms in the labor market. By allowing workers to invest in education, we extend a matching model with two-sided heterogeneity to incorporate an endogenous distribution of high and low skill workers. We consider various possibilities for the cost of acquiring skills and show that while unemployment increases in most scenarios, the effect on the distribution of vacancy and worker types varies according to the structure of skill costs. When the model is extended to incorporate endogenous labor market participation, we show that the unemployment rate becomes less informative of the state of the labor market as the participation margin absorbs employment effects. The third essay studies the effects of labor taxes on equilibrium labor market outcomes and macroeconomic dynamics in a New Keynesian model with matching frictions. Three policy instruments are considered: a marginal tax and a tax subsidy to produce tax progression schemes, and a replacement ratio to account for variability in outside options. In equilibrium, the marginal tax rate and replacement ratio dampen economic activity whereas tax subsidies boost the economy. The marginal tax rate and replacement ratio amplify shock responses whereas employment subsidies weaken them. The tax instruments affect the degree to which the wage absorbs shocks. We show that increasing tax progression when taxation is initially progressive is harmful for steady state employment and output, and amplifies the sensitivity of macroeconomic variables to shocks. When taxation is initially proportional, increasing progression is beneficial for output and employment and dampens shock responses.

Tibetan Market Participation in China

Since the Chinese government began implementing economic reforms in the late 1970s, China has experienced profound economic change and growth. Like other parts of China, Tibetan areas of China have also experienced wide-ranging economic change with growth even higher than the China-wide average in certain years. Though China s strategic policy of developing the West provided many opportunities for economic and business activities, Tibetans have proven poorly equipped to respond to and take advantage of these opportunities. This study is about people, about market participation and specifically about why Tibetans do not effectively participate in the market in the context of China s economic development process. Many political, social, cultural and environmental factors explain the difficulties met by Tibetan communities. However, this study focuses on three factors: the social and culture context, government policy and education. The Buddhistic nature of Tibetan communities, particularly the political and economic system in traditional Tibetan society, explains this, especially after implementation of new national economic policies. An inclusive economic development policy that promotes local people s participation in the market demands serious consideration of local conditions. Unfortunately, such considerations often ignore local Tibetan realities. The economic development policy in Tibetan areas in China is nearly always an attempt to replicate the inland model and open up markets, even though economic and sociopolitical conditions in Tibet are markedly unlike much of China. A consequence of these policies is increasing numbers of non-Tibetan migrants flowing into Tibetan areas with the ensuing marginalization of Tibetans in the marketplace. Poor quality education is another factor contributing to Tibetan inability to effectively participate in the market. Vocational and business education targeting Tibetans is of very low quality and reflective of government failing to consider local circumstances when implementing education policy. The relatively few Tibetans who do receive education are nearly always unable to compete with non-Tibetan migrants in commercial activity. Encouraging and promoting Tibetan participation in business development and access to quality education are crucial for a sustainable and prosperous society in the long term. Particularly, a localized development policy that considers local environmental conditions and production as well as local culture is crucial. Tibet s economic development should be based on local environmental and production conditions, while utilizing Tibetan culture for the benefit of creating a sustainable economy. Such a localized approach best promotes Tibetan market participation. Keywords: Tibet cultural policy education market participation

Residential Differentiation, Housing Policy and Urban Planning in the Transformation from State Socialism to a Market Economy: The Case of Tallinn

The thesis examines urban issues arising from the transformation from state socialism to a market economy. The main topics are residential differentiation, i.e., uneven spatial distribution of social groups across urban residential areas, and the effects of housing policy and town planning on urban development. The case study is development in Tallinn, the capital city of Estonia, in the context of development of Central and Eastern European cities under and after socialism. The main body of the thesis consists of four separately published refereed articles. The research question that brings the articles together is how the residential (socio-spatial) pattern of cities developed during the state socialist period and how and why that pattern has changed since the transformation to a market economy began. The first article reviews the literature on residential differentiation in Budapest, Prague, Tallinn and Warsaw under state socialism from the viewpoint of the role of housing policy in the processes of residential differentiation at various stages of the socialist era. The paper shows how the socialist housing provision system produced socio-occupational residential differentiation directly and indirectly and it describes how the residential patterns of these cities developed. The second article is critical of oversimplified accounts of rapid reorganisation of the overall socio-spatial pattern of post-socialist cities and of claims that residential mobility has had a straightforward role in it. The Tallinn case study, consisting of an analysis of the distribution of socio-economic groups across eight city districts and over four housing types in 1999 as well as examining the role of residential mobility in differentiation during the 1990s, provides contrasting evidence. The third article analyses the role and effects of housing policies in Tallinn s residential differentiation. The focus is on contemporary post-privatisation housing-policy measures and their effects. The article shows that the Estonian housing policies do not even aim to reduce, prevent or slow down the harmful effects of the considerable income disparities that are manifest in housing inequality and residential differentiation. The fourth article examines the development of Tallinn s urban planning system 1991-2004 from the viewpoint of what means it has provided the city with to intervene in urban development and how the city has used these tools. The paper finds that despite some recent progress in planning, its role in guiding where and how the city actually developed has so far been limited. Tallinn s urban development is rather initiated and driven by private agents seeking profit from their investment in land. The thesis includes original empirical research in the three articles that analyse development since socialism. The second article employs quantitative data and methods, primarily index calculation, whereas the third and the fourth ones draw from a survey of policy documents combined with interviews with key informants. Keywords: residential differentiation, housing policy, urban planning, post-socialist transformation, Estonia, Tallinn

The significance of brittle reaction layers in fusing of dental ceramics to titanium

This thesis comprises four intercomplementary parts that introduce new approaches to brittle reaction layers and mechanical compatibility of metalloceramic joints created when fusing dental ceramics to titanium. Several different methods including atomic layer deposition (ALD), sessile drop contact angle measurements, scanning acoustic microscopy (SAM), three-point bending (TPB, DIN 13 927 / ISO 9693), cross-section microscopy, scanning electron microscopy (SEM), and energy dispersive X-ray spectroscopy (EDS) were employed. The first part investigates the effects of TiO2 layer structure and thickness on the joint strength of the titanium-metalloceramic system. Samples with all tested TiO2 thicknesses displayed good ceramics adhesion to Ti, and uniform TPB results. The fracture mode was independent of oxide layer thickness and structure. Cracking occurred deeper inside titanium, in the oxygen-rich Ti[O]x solid solution surface layer. During dental ceramics firing TiO2 layers dissociate and joints become brittle with increased dissolution of oxygen into metallic Ti and consequent reduction in the metal plasticity. To accomplish an ideal metalloceramic joint this needs to be resolved. The second part introduces photoinduced superhydrophilicity of TiO2. Test samples with ALD deposited anatase TiO2 films were produced. Samples were irradiated with UV light to induce superhydrophilicity of the surfaces through a cascade leading to increased amount of surface hydroxyl groups. Superhydrophilicity (contact angle ~0˚) was achieved within 2 minutes of UV radiation. Partial recovery of the contact angle was observed during the first 10 minutes after UV exposure. Total recovery was not observed within 24h storage. Photoinduced ultrahydrophilicity can be used to enhance wettability of titanium surfaces, an important factor in dental ceramics veneering processes. The third part addresses interlayers designed to restrain oxygen dissolution into Ti during dental ceramics fusing. The main requirements for an ideal interlayer material are proposed. Based on these criteria and systematic exclusion of possible interlayer materials silver (Ag) interlayers were chosen. TPB results were significantly better in when 5 μm Ag interlayers were used compared to only Al2O3-blasted samples. In samples with these Ag interlayers multiple cracks occurred inside dental ceramics, none inside Ti structure. Ag interlayers of 5 μm on Al2O3-blasted samples can be efficiently used to retard formation of the brittle oxygen-rich Ti[O]x layer, thus enhancing metalloceramic joint integrity. The most brittle component in metalloceramic joints with 5 μm Ag interlayers was bulk dental ceramics instead of Ti[O]x. The fourth part investigates the importance of mechanical interlocking. According to the results, the significance of mechanical interlocking achieved by conventional surface treatments can be questioned as long as the formation of the brittle layers (mainly oxygen-rich Ti[O]x) cannot be sufficiently controlled. In summary in contrast to former impressions of thick titanium oxide layers this thesis clearly demonstrates diffusion of oxygen from sintering atmosphere and SiO2 to Ti structures during dental ceramics firing and the following formation of brittle Ti[O]x solid solution as the most important factors predisposing joints between Ti and SiO2-based dental ceramics to low strength. This among other predisposing factors such as residual stresses created by the coefficient of thermal expansion mismatch between dental ceramics and Ti frameworks can be avoided with Ag interlayers.

Disjunct eddy covariance measurements of volatile organic compound fluxes using proton transfer reaction mass spectrometry

Volatile organic compounds (VOCs) are emitted into the atmosphere from natural and anthropogenic sources, vegetation being the dominant source on a global scale. Some of these reactive compounds are deemed major contributors or inhibitors to aerosol particle formation and growth, thus making VOC measurements essential for current climate change research. This thesis discusses ecosystem scale VOC fluxes measured above a boreal Scots pine dominated forest in southern Finland. The flux measurements were performed using the micrometeorological disjunct eddy covariance (DEC) method combined with proton transfer reaction mass spectrometry (PTR-MS), which is an online technique for measuring VOC concentrations. The measurement, calibration, and calculation procedures developed in this work proved to be well suited to long-term VOC concentration and flux measurements with PTR-MS. A new averaging approach based on running averaged covariance functions improved the determination of the lag time between wind and concentration measurements, which is a common challenge in DEC when measuring fluxes near the detection limit. The ecosystem scale emissions of methanol, acetaldehyde, and acetone were substantial. These three oxygenated VOCs made up about half of the total emissions, with the rest comprised of monoterpenes. Contrary to the traditional assumption that monoterpene emissions from Scots pine originate mainly as evaporation from specialized storage pools, the DEC measurements indicated a significant contribution from de novo biosynthesis to the ecosystem scale monoterpene emissions. This thesis offers practical guidelines for long-term DEC measurements with PTR-MS. In particular, the new averaging approach to the lag time determination seems useful in the automation of DEC flux calculations. Seasonal variation in the monoterpene biosynthesis and the detailed structure of a revised hybrid algorithm, describing both de novo and pool emissions, should be determined in further studies to improve biological realism in the modelling of monoterpene emissions from Scots pine forests. The increasing number of DEC measurements of oxygenated VOCs will probably enable better estimates of the role of these compounds in plant physiology and tropospheric chemistry. Keywords: disjunct eddy covariance, lag time determination, long-term flux measurements, proton transfer reaction mass spectrometry, Scots pine forests, volatile organic compounds

Monetary Policy Implementation in the Interbank Market

The liquidity crisis that swept through the financial markets in 2007 triggered multi-billion losses and forced buyouts of some large banks. The resulting credit crunch is sometimes compared to the great recession in the early twentieth century. But the crisis also serves as a reminder of the significance of the interbank market and of proper central bank policy in this market. This thesis deals with implementation of monetary policy in the interbank market and examines how central bank tools affect commercial banks' decisions. I answer the following questions: • What is the relationship between the policy setup and interbank interest rate volatility? (averaging reserve requirement reduces the volatility) • What can explain a weak relationship between market liquidity and the interest rate? (high reserve requirement buffer) • What determines banks' decisions on when to satisfy the reserve requirement? (market frictions) • How did the liquidity crisis that began in 2007 affect interbank market behaviour? (resulted in higher credit risk and trading frictions as well as expected liquidity shortage)

Empirical Studies on Labor Market Matching (summary section only)

This thesis analyzes how matching takes place at the Finnish labor market from three different angles. The Finnish labor market has undergone severe structural changes following the economic crisis in the early 1990s. The labor market has had problems adjusting from these changes and hence a high and persistent unemployment has followed. In this thesis I analyze if matching problems, and in particular if changes in matching, can explain some of this persistence. The thesis consists of three essays. In the first essay Finnish Evidence of Changes in the Labor Market Matching Process the matching process at the Finnish labor market is analyzed. The key finding is that the matching process has changed thoroughly between the booming 1980s and the post-crisis period. The importance of the number of unemployed, and in particular long-term unemployed, for the matching process has vanished. More unemployed do not increase matching as theory predicts but rather the opposite. In the second essay, The Aggregate Matching Function and Directed Search -Finnish Evidence, stock-flow matching as a potential micro foundation of the aggregate matching function is studied. In the essay I show that newly unemployed match mainly with the stock of vacancies while longer term unemployed match with the inflow of vacancies. When aggregating I still find evidence of the traditional aggregate matching function. This could explain the huge support the aggregate matching function has received despite its odd randomness assumption. The third essay, How do Registered Job Seekers really match? -Finnish occupational level Evidence, studies matching for nine occupational groups and finds that very different matching problems exist for different occupations. In this essay also misspecification stemming from non-corresponding variables is dealt with through the introduction of a completely new set of variables. The new outflow measure used is vacancies filled with registered job seekers and it is matched by the supply side measure registered job seekers.

Essays on Market Microstructure: Price Discovery and Informed Trading

Market microstructure is “the study of the trading mechanisms used for financial securities” (Hasbrouck (2007)). It seeks to understand the sources of value and reasons for trade, in a setting with different types of traders, and different private and public information sets. The actual mechanisms of trade are a continually changing object of study. These include continuous markets, auctions, limit order books, dealer markets, or combinations of these operating as a hybrid market. Microstructure also has to allow for the possibility of multiple prices. At any given time an investor may be faced with a multitude of different prices, depending on whether he or she is buying or selling, the quantity he or she wishes to trade, and the required speed for the trade. The price may also depend on the relationship that the trader has with potential counterparties. In this research, I touch upon all of the above issues. I do this by studying three specific areas, all of which have both practical and policy implications. First, I study the role of information in trading and pricing securities in markets with a heterogeneous population of traders, some of whom are informed and some not, and who trade for different private or public reasons. Second, I study the price discovery of stocks in a setting where they are simultaneously traded in more than one market. Third, I make a contribution to the ongoing discussion about market design, i.e. the question of which trading systems and ways of organizing trading are most efficient. A common characteristic throughout my thesis is the use of high frequency datasets, i.e. tick data. These datasets include all trades and quotes in a given security, rather than just the daily closing prices, as in traditional asset pricing literature. This thesis consists of four separate essays. In the first essay I study price discovery for European companies cross-listed in the United States. I also study explanatory variables for differences in price discovery. In my second essay I contribute to earlier research on two issues of broad interest in market microstructure: market transparency and informed trading. I examine the effects of a change to an anonymous market at the OMX Helsinki Stock Exchange. I broaden my focus slightly in the third essay, to include releases of macroeconomic data in the United States. I analyze the effect of these releases on European cross-listed stocks. The fourth and last essay examines the uses of standard methodologies of price discovery analysis in a novel way. Specifically, I study price discovery within one market, between local and foreign traders.