Studies on the international effects of real shocks

This doctoral thesis addresses the macroeconomic effects of real shocks in open economies in flexible exchange rate regimes. The first study of this thesis analyses the welfare effects of fiscal policy in a small open economy, where private and government consumption are substitutes in terms of private utility. The main findings are as follows: fiscal policy raises output, bringing it closer to its efficient level, but is not welfare-improving even though government spending directly affects private utility. The main reason for this is that the introduction of useful government spending implies a larger crowding-out effect on private consumption, when compared with the `pure waste' case. Utility decreases since one unit of government consumption yields less utility than one unit of private consumption. The second study of this thesis analyses the question of how the macroeconomic effects of fiscal policy in a small open economy depend on optimal intertemporal behaviour. The key result is that the effects of fiscal policy depend on the size of the elasticity of substitution between traded and nontraded goods. In particular, the sign of the current account response to fiscal policy depends on the interplay between the intertemporal elasticity of aggregate consumption and the elasticity of substitution between traded and nontraded goods. The third study analyses the consequences of productive government spending on the international transmission of fiscal policy. A standard result in the New Open Economy Macroeconomics literature is that a fiscal shock depreciates the exchange rate. I demonstrate that the response of the exchange rate depends on the productivity of government spending. If productivity is sufficiently high, a fiscal shock appreciates the exchange rate. It is also shown that the introduction of productive government spending increases both domestic and foreign welfare, when compared with the case where government spending is wasted. The fourth study analyses the question of how the international transmission of technology shocks depends on the specification of nominal rigidities. A growing body of empirical evidence suggests that a positive technology shock leads to a temporary decline in employment. In this study, I demonstrate that the open economy dimension can enhance the ability of sticky price models to account for the evidence. The reasoning is as follows. An improvement in technology appreciates the nominal exchange rate. Under producer-currency pricing, the exchange rate appreciation shifts global demand toward foreign goods away from domestic goods. This causes a temporary decline in domestic employment.

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.

Governmental rationalities and the local dimension of European politics. A study of the Interreg IV programme "Alpenrhein-Bodensee-Hochrhein"

The thesis aims at investigating the local dimension of the EU cohesion policy through the utilization of an alternative approach, which aims at the analysis of discourse and structures of power. The concrete case under analysis is the Interreg IV programme “Alpenrhein-Bodensee-Hochrhein”, which is conducted in the border region between Germany, Switzerland, Austria and the principality of Liechtenstein. The main research question is stated as such: What governmental rationalities can be found at work in the field of EU cross-border cooperation programmes? How is directive action and cooperation envisioned? How coherent are the different rationalities, which are found at work? The theoretical framework is based on a Foucaultian understanding of power and discourse and utilizes the notion of governmentalities as a way to de-stabilize the understanding of directive action and in order to highlight the dispersed and heterogeneous nature of governmental activity. The approach is situated within the general field of research on the European Union connected to basic conceptualisations such as the nature of power, the role of discourse and modes of subjectification. An approach termed “analytics of government”, based on the work of researchers like Mitchell Dean is introduced as the basic framework for the analysis. Four dimensions (visiblities, subjectivities, techniques/practices, problematisations) are presented as a set of tools with which governmental regimes of practices can be analysed. The empirical part of the thesis starts out with a discussion of the general framework of the European Union's cohesion policy and places the Interreg IV Alpenrhein-Bodensee-Hochrhein programme in this general context. The main analysis is based on eleven interviews which were conducted with different individuals, participating in the programme on different levels. The selection of interview partners aimed at maximising heterogeneity through including individuals from all parts of the programme region, obtaining different functions within the programme. The analysis reveals interesting aspects pertaining to the implementation and routine aspects of work within initiatives conducted under the heading of the EU cohesion policy. The central aspects of an Interreg IV Alpenrhein-Bodensee-Hochrhein – governmentality are sketched out. This includes a positive perception of the work atmosphere, administrative/professional characterisation of the selves and a de-politicization of the programme. Characteristic is the experience of tensions by interview partners and the use of discoursive strategies to resolve them. Negative perceptions play an important role for the specific governmental rationality. The thesis contributes to a better understanding of the local dimension of the European Union cohesion policy and questions established ways of thinking about governmental activity. It provides an insight into the working of power mechanisms in the constitution of fields of discourse and points out matters of practical importance as well as subsequent research questions.