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

The Human UDP-Glucuronosyltransferases: Studies on Substrate Binding and Catalytic Mechanism

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Mechanism of RNA Translocation by a Viral Packaging Motor

Molecular motors are proteins that convert chemical energy into mechanical work. The viral packaging ATPase P4 is a hexameric molecular motor that translocates RNA into preformed viral capsids. P4 belongs to the ubiquitous class of hexameric helicases. Although its structure is known, the mechanism of RNA translocation remains elusive. Here we present a detailed kinetic study of nucleotide binding, hydrolysis, and product release by P4. We propose a stochastic-sequential cooperative model to describe the coordination of ATP hydrolysis within the hexamer. In this model the apparent cooperativity is a result of hydrolysis stimulation by ATP and RNA binding to neighboring subunits rather than cooperative nucleotide binding. Simultaneous interaction of neighboring subunits with RNA makes the otherwise random hydrolysis sequential and processive. Further, we use hydrogen/deuterium exchange detected by high resolution mass spectrometry to visualize P4 conformational dynamics during the catalytic cycle. Concerted changes of exchange kinetics reveal a cooperative unit that dynamically links ATP binding sites and the central RNA binding channel. The cooperative unit is compatible with the structure-based model in which translocation is effected by conformational changes of a limited protein region. Deuterium labeling also discloses the transition state associated with RNA loading which proceeds via opening of the hexameric ring. Hydrogen/deuterium exchange is further used to delineate the interactions of the P4 hexamer with the viral procapsid. P4 associates with the procapsid via its C-terminal face. The interactions stabilize subunit interfaces within the hexamer. The conformation of the virus-bound hexamer is more stable than the hexamer in solution, which is prone to spontaneous ring openings. We propose that the stabilization within the viral capsid increases the packaging processivity and confers selectivity during RNA loading. Finally, we use single molecule techniques to characterize P4 translocation along RNA. While the P4 hexamer encloses RNA topologically within the central channel, it diffuses randomly along the RNA. In the presence of ATP, unidirectional net movement is discernible in addition to the stochastic motion. The diffusion is hindered by activation energy barriers that depend on the nucleotide binding state. The results suggest that P4 employs an electrostatic clutch instead of cycling through stable, discrete, RNA binding states during translocation. Conformational changes coupled to ATP hydrolysis modify the electrostatic potential inside the central channel, which in turn biases RNA motion in one direction. Implications of the P4 model for other hexameric molecular motors are discussed.

Phylogeny of a taxonomically difficult group and evolution of host location mechanism

The parasitic wasps are one of the largest insect groups and their life histories are remarkably variable. Common to all parasitic wasps is that they kill their hosts, which are usually beetles, butterflies and sometimes spiders. Hosts are often at a larval or pupal stage and live in concealed conditions, such as in plant tissue. Parasitic wasps have two main ways of finding their host. 1) They can detect chemical compounds emitted by damaged plant material or released by larvae living in plant tissue, and 2) detect the larvae by sound vibrations. Even though pupae are immobile and silent, and therefore do not cause vibration, parasitoids have, however, adapted to find passive developmental stages by producing vibration themselves by knocking the substrate with their antennae, and then detecting the echoes with their legs. This echolocation allows a parasitoid to locate its potential hosts that are deeply buried in wood. This study focuses on the relationships of the subfamily Cryptinae (Hymenoptera: Ichneumonidae) and related taxa, and the evolution of host location mechanism. There are no earlier studies of the phylogeny of the Cryptinae, and the position of related taxa are unclear. According to the earlier classification, which is entirely intuitional, the Cryptinae is divided into three tribes: Cryptini, Hemigasterini and Phygadeuontini. Further, these tribes are subdiveded into numerous subtribes. This work, based on molecular characters, shows that the cryptine tribes Cryptini, Phygadeuon¬tini and Hemigasterini come out largely as monophyletic groups, thus agreeing with the earlier classification. The earlier subtribal classification had no support. In addition, it is shown that modified antennal structures are associated with host usage of wood-boring coleopteran hosts. The cryptines have a clear modification series on their antennal tips from a simply tip to a hammer-like structure. The species with strongly modified antennae belong mostly to the tribe Cryptini and they utilise wood-boring beetles as hosts. Also, field observations on insect behaviour support this result.

Seismic Tomography and Earthquake Mechanism Beneath the Central Fennoscandian Shield

The aim of this thesis was to study the seismic tomography structure of the earth s crust together with earthquake distribution and mechanism beneath the central Fennoscandian Shield, mainly in southern and central Finland. The earthquake foci and some fault plane solutions are correlated with 3-D images of the velocity tomography. The results are discussed in relation to the stress field of the Shield and with other geophysical, e.g. geomagnetic, gravimetric, tectonic, and anisotropy studies of the Shield. The earthquake data of the Fennoscandian Shield has been extracted from the Nordic earthquake parameter data base which was founded at the time of inception of the earthquake catalogue for northern Europe. Eight earlier earthquake source mechanisms are included in a pilot study on creating a novel technique for calculating an earthquake fault plane solution. Altogether, eleven source mechanisms of shallow, weak earthquakes are related in the 3-D tomography model to trace stresses of the crust in southern and central Finland. The earthquakes in the eastern part of the Fennoscandian Shield represent low-active, intraplate seismicity. Earthquake mechanisms with NW-SE oriented horizontal compression confirm that the dominant stress field originates from the ridge-push force in the North Atlantic Ocean. Earthquakes accumulate in coastal areas, in intersections of tectonic lineaments, in main fault zones or are bordered by fault lines. The majority of Fennoscandian earthquakes concentrate on the south-western Shield in southern Norway and Sweden. Onwards, epicentres spread via the ridge of the Shield along the west-coast of the Gulf of Bothnia northwards along the Tornio River - Finnmark fault system to the Barents Sea, and branch out north-eastwards via the Kuusamo region to the White Sea Kola Peninsula faults. The local seismic tomographic method was applied to find the terrane distribution within the central parts of the Shield the Svecofennian Orogen. From 300 local explosions a total of 19765 crustal Pg- and Sg-wave arrival times were inverted to create independent 3-D Vp and Vs tomographic models, from which the Vp/Vs ratio was calculated. The 3-D structure of the crust is presented as a P-wave and for the first time as an S-wave velocity model, and also as a Vp/Vs-ratio model of the SVEKALAPKO area that covers 700x800 km2 in southern and central Finland. Also, some P-wave Moho-reflection data was interpolated to image the relief of the crust-mantle boundary (i.e. Moho). In the tomography model, the seismic velocities vary smoothly. The lateral variations are larger for Vp (dVp =0.7 km/s) than for Vs (dVs =0.4 km/s). The Vp/Vs ratio varies spatially more distinctly than P- and S-wave velocities, usually from 1.70 to 1.74 in the upper crust and from 1.72 to 1.78 in the lower crust. Schist belts and their continuations at depth are associated with lower velocities and lower Vp/Vs ratios than in the granitoid areas. The tomography modelling suggests that the Svecofennian Orogen was accreted from crustal blocks ranging in size from 100x100 km2 to 200x200 km2 in cross-sectional area. The intervening sedimentary belts have ca. 0.2 km/s lower P- and S-wave velocities and ca. 0.04 lower Vp/Vs ratios. Thus, the tomographic model supports the concept that the thick Svecofennian crust was accreted from several crustal terranes, some hidden, and that the crust was later modified by intra- and underplating. In conclusion, as a novel approach the earthquake focal mechanism and focal depth distribution is discussed in relation to the 3-D tomography model. The schist belts and the transformation zones between the high- and low-velocity anomaly blocks are characterized by deeper earthquakes than the granitoid areas where shallow events dominate. Although only a few focal mechanisms were solved for southern Finland, there is a trend towards strike-slip and oblique strike-slip movements inside schist areas. The normal dip-slip type earthquakes are typical in the seismically active Kuusamo district in the NE edge of the SVEKALAPKO area, where the Archean crust is ca. 15-20 km thinner than the Proterozoic Svecofennian crust. Two near vertical dip-slip mechanism earthquakes occurred in the NE-SW junction between the Central Finland Granitoid Complex and the Vyborg rapakivi batholith, where high Vp/Vs-ratio deep-set intrusion splits the southern Finland schist belt into two parts in the tomography model.

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

Social Networks and Everyday Practices in Russia

My doctoral dissertation in sociology and Russian studies, Social Networks and Everyday Practices in Russia, employs a "micro" or "grassroots" perspective on the transition. The study is a collection of articles detailing social networks in five different contexts. The first article examines Russian birthdays from a network perspective. The second takes a look at health care to see whether networks have become obsolete in a sector that is still overwhelmingly public, but increasingly being monetarised. The third article investigates neighbourhood relations. The fourth details relationships at work, particularly from the vantage point of internal migration. The fifth explores housing and the role of networks and money both in the Soviet and post-Soviet era. The study is based on qualitative social network and interview data gathered among three groups, teachers, doctors and factory workers, in St. Petersburg during 1993-2000. Methodologically it builds on a qualitative social network approach. The study adds a critical element to the discussion on networks in post-socialism. A considerable consensus exists that social networks were vital in state socialist societies and were used to bypass various difficulties caused by endemic shortages and bureaucratic rigidities, but a more debated issue has been their role in post-socialism. Some scholars have argued that the importance of networks has been dramatically reduced in the new market economy, whereas others have stressed their continuing importance. If a common denominator in both has been a focus on networks in relation to the past, a more overlooked aspect has been the question of inequality. To what extent is access to networks unequally distributed? What are the limits and consequences of networks, for those who have access, those outside networks or society at large? My study provides some evidence about inequalities. It shows that some groups are privileged over others, for instance, middle-class people in informal access to health care. Moreover, analysing the formation of networks sheds additional light on inequalities, as it highlights the importance of migration as a mechanism of inequality, for example. The five articles focus on how networks are actually used in everyday life. The article on health care, for instance, shows that personal connections are still important and popular in post-Soviet Russia, despite the growing importance of money and the emergence of "fee for service" medicine. Fifteen of twenty teachers were involved in informal medical exchange during a two-week study period, so that they used their networks to bypass the formal market mechanisms or official procedures. Medicines were obtained through personal connections because some were unavailable at local pharmacies or because these connections could provide medicines for a cheaper price or even for free. The article on neighbours shows that "mutual help" was the central feature of neighbouring, so that the exchange of goods, services and information covered almost half the contacts with neighbours reported. Neighbours did not provide merely small-scale help but were often exchange partners because they possessed important professional qualities, had access to workplace resources, or knew somebody useful. The article on the Russian work collective details workplace-related relationships in a tractor factory and shows that interaction with and assistance from one's co-workers remains important. The most interesting finding was that co-workers were even more important to those who had migrated to the city than to those who were born there, which is explained by the specifics of Soviet migration. As a result, the workplace heavily influenced or absorbed contexts for the worker migrants to establish relationships whereas many meeting-places commonly available in Western countries were largely absent or at least did not function as trusted public meeting places to initiate relationships. More results are to be found from my dissertation: Anna-Maria Salmi: Social Networks and Everyday Practices in Russia, Kikimora Publications, 2006, see www.kikimora-publications.com.

Modern Societal Impulses and their Nordic Manifestations : On Emancipation and Constraint in Societal Development

The 1980s and the early 1990s have proved to be an important turning point in the history of the Nordic welfare states. After this breaking point, the Nordic social order has been built upon a new foundation. This study shows that the new order is mainly built upon new hierarchies and control mechanisms that have been developed consistently through economic and labour market policy measures. During the post-war period Nordic welfare states to an increasing extent created equality of opportunity and scope for agency among people. Public social services were available for all and the tax-benefit system maintained a level income distribution. During this golden era of Nordic welfare state, the scope for agency was, however, limited by social structures. Public institutions and law tended to categorize people according to their life circumstances ascribing them a predefined role. In the 1980s and 1990s this collectivist social order began to mature and it became subject to political renegotiation. Signs of a new social order in the Nordic countries have included the liberation of the financial markets, the privatizing of public functions and redefining the role of the public sector. It is now possible to reassess the ideological foundations of this new order. As a contrast to widely used political rhetoric, the foundation of the new order has not been the ideas of individual freedom or choice. Instead, the most important aim appears to have been to control and direct people to act in accordance with the rules of the market. The various levels of government and the social security system have been redirected to serve this goal. Instead of being a mechanism for redistributing income, the Nordic social security system has been geared towards creating new hierarchies on the Nordic labour markets. During the past decades, conditions for receiving income support and unemployment benefit have been tightened in all Nordic countries. As a consequence, people have been forced to accept deteriorating terms and conditions on the labour market. Country-specific variations exist, however: in sum Sweden has been most conservative, Denmark most innovative and Finland most radical in reforming labour market policy. The new hierarchies on the labour market have co-incided with slow or non-existent growth of real wages and with a strong growth of the share of capital income. Slow growth of real wages has kept inflation low and thus secured the value of capital. Societal development has thus progressed from equality of opportunity during the age of the welfare states towards a hierarchical social order where the majority of people face increasing constraints and where a fortunate minority enjoys prosperity and security.

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.