Informational efficiency of the European Union emission allowance market

This thesis studies the informational efficiency of the European Union emission allowance (EUA) market. In an efficient market, the market price is unpredictable and profits above average are impossible in the long run. The main research problem is does the EUA price follow a random walk. The method is an econometric analysis of the price series, which includes an autocorrelation coefficient test and a variance ratio test. The results reveal that the price series is autocorrelated and therefore a nonrandom walk. In order to find out the extent of predictability, the price series is modelled with an autoregressive model. The conclusion is that the EUA price is autocorrelated only to a small degree and that the predictability cannot be used to make extra profits. The EUA market is therefore considered informationally efficient, although the price series does not fulfill the requirements of a random walk. A market review supports the conclusion, but it is clear that the maturing of the market is still in process.

Influence of harvesting strategy on nutrient supply and production of dairy cows consuming diets based on grass and red clover silage

The main objective of this thesis was to elucidate the effects of regrowth grass silage and red clover silage on nutrient supply and milk production of dairy cows as compared with primary growth grass silages. In the first experiment (publication I), two primary growth and four regrowth grass silages were harvested at two stages of growth. These six silages were fed to 24 lactating dairy cows with two levels of concentrate allowance. Silage intake and energy corrected milk yield (ECM) responses, and the range in these response variables between the diets, were smaller when regrowth silages rather than primary growth silages were fed. Milk production of dairy cows reflected the intake of metabolizable energy (ME), and no differences in the ME utilization were found between the diets based on silages harvested from primary growth and regrowth. The ECM response to increased concentrate allowance was, on average, greater when regrowth rather than primary growth silages were fed. In the second experiment (publication II), two silages from primary growth and two from regrowth used in I were fed to rumen cannulated lactating dairy cows. Cows consumed less feed dry matter (DM), energy and protein, and produced less milk, when fed diets based on regrowth silages rather than primary growth silages. Lower milk production responses of regrowth grass silage diets were mainly due to the lower silage DM intake, and could not be accounted for by differences in energy or protein utilization. Regrowth grass silage intake was not limited due to neutral detergent fibre (NDF) digestion or rumen fill or passage kinetics. However, lower intake may be at least partly attributable to plant diseases such as leaf spot infections, dead deteriorating material or abundance of weeds, which are all higher in regrowth compared with primary growth, and increase with advancing regrowth. In the third experiment (publications III and IV), red clover silages and grass silages harvested at two stages of growth, and a mixed diet of red clover and grass silages, were fed to five rumen cannulated lactating dairy cows. In spite of the lower average ME intake for red clover diets, the ECM production remained unchanged suggesting more efficient utilisation of ME for red clover diets compared with grass diets. Intake of N, and omasal canal flows of total non-ammonia N (NAN), microbial and non-microbial NAN were higher for red clover than for grass silage diets, but were not affected by forage maturity. Delaying the harvest tended to decrease DM intake of grass silage and increase that of red clover silage. The digestion rate of potentially digestible NDF was faster for red clover diets than for grass silage diets. Delaying the harvest decreased the digestion rate for grass but increased it for red clover silage diets. The low intake of early-cut red clover silage could not be explained by silage digestibility, fermentation quality, or rumen fill but was most likely related to the nutritionally suboptimal diet composition because inclusion of moderate quality grass silage in mixed diet increased silage DM intake. Despite the higher total amino acid supply of cows fed red clover versus grass silage diets, further milk production responses on red clover diets were possibly compromised by an inadequate supply of methionine as evidenced by lower methionine concentration in the amino acid profile of omasal digesta and plasma. Increasing the maturity of ensiled red clover does not seem to affect silage DM intake as consistently as that of grasses. The efficiency of N utilization for milk protein synthesis was lower for red clover diets than for grass diets. It was negatively related to diet crude protein concentration similarly to grass silage diets.

Rearing strategies of young dairy calves in relation to production, behaviour and welfare

Vasikoiden kasvatus yksilökarsinoissa, imemismahdollisuuden puute maitojuoton yhteydessä sekä pienet juomamäärät ovat tekijöitä, jotka mahdollisesti voivat vähentää vasikoiden hyvinvointia. Vasikoiden kasvatukseen etsitäänkin uusia tapoja, joissa eläinten käyttäytymistarpeet ja hyvinvointi otetaan entistä paremmin huomioon. Tässä väitöskirjassa vasikoiden kasvatusta on tarkasteltu sekä tuotannon että vasikoiden käyttäytymisen ja hyvinvoinnin kannalta. Väitöskirja koostuu kolmesta kokeesta, joista ensimmäisessä tutkittiin vasikoiden kasvatusta ryhmäkarsinoissa ulkona tai sisällä ja vasikoiden kasvatusta sisällä ryhmä- tai yksilökarsinoissa. Toisessa kokeessa vasikoiden annettiin imeä emiään rajoitetusti lypsyn jälkeen viiden tai kahdeksan viikon ajan ja kolmannessa selvitettiin vasikoiden veden juontia, kun vasikat saivat juomarehua vapaasti. Lisäksi kokeiden yhdistetystä aineistosta analysoitiin eri rehujen syöntimäärien suhdetta sekä rehujen vaikutusta kasvuun ennen ja jälkeen maidosta vieroituksen. Tutkimuksessa todettiin, että vasikoita voi ryhmässä kasvattaa kylmissä ja vaihtelevissa sääoloissa ulkona, kunhan ne hoidetaan ja ruokitaan erittäin huolellisesti. Kylmällä ilmalla vasikat saattavat kuitenkin syödä väkirehua vähemmän varsinkin, jos ruokailupaikka on ulkona ja makuualue sisällä. Ryhmässä kasvaneet vasikat aloittivat sekä kuivien rehujen syönnin että märehtimisen nuorempina kuin yksilökarsinassa kasvaneet. Ryhmissä esiintyvää käyttäytymisongelmaa, toisten vasikoiden imemistä, voidaan vähentää hoito- ja ruokintamenetelmillä. Annettaessa vasikoiden imeä emiään rajoitetusti lypsyn jälkeen vasikat oppivat imemään emiään hyvin nopeasti. Lypsytyö vaikeutui muutamien lehmien kohdalla, sillä ne pidättivät maitoa lypsettäessä. Saadessaan imeä rajoitetusti vasikat imivät suurehkoja maitomääriä kerrallaan. Vieroittaminen suurilta maitomääriltä viiden viikon iässä oli kuitenkin liian aikaista, koska vasikat eivät vielä syöneet riittävästi kuivia rehuja. Vieroitus emästä niin viiden kuin kahdeksankin viikon iässä aiheutti vasikoissa levottomuutta ja ääntelyn lisääntymistä. Saadessaan hapatettua juomarehua vapaasti vasikat joivat keskimäärin vain vähän vettä, olipa vesilähteenä avoin ämpäri tai vesinippa. Vasikoiden välillä oli suurta vaihtelua veden juontimäärissä. Viikkoa ennen maidosta vieroitusta vasikat joivat 0-3 l vettä päivässä. Vasikat joivat nipasta kerrallaan vähemmän vettä kuin ämpäristä, ja käyttivät enemmän aikaa päivässä veden juomiseen kuin vesiämpäristä juoneet vasikat. Suurin osa vasikoista joi vettä juomanipoista erikoisella tavalla esimerkiksi painamalla nippaa otsalla ja juomalla tippuvaa vettä. Vesinipat voivat olla siis vasikoille joko vaikeita tai epämukavia käyttää. Vasikoiden juoman maitomäärän lisääntyessä kasvu lisääntyy selvästi. Runsas maidon juominen vähentää kuitenkin kuivien rehujen syöntiä ja vieroitusvaiheessa kasvu voi hidastua. Vasikat olisikin tärkeää vieroittaa vähitellen, ettei muutoksia kasvuun tulisi. Syönti- ja kasvutulokset eivät aina anna oikeaa kuvaa kasvatusmenetelmien eroista eläinten hyvinvoinnin kannalta. Käyttäytyminen on herkkä hyvinvoinnin mittari ja se tulisikin aina huomioida eri kasvatusmenetelmiä arvioitaessa. .

Studies on the Effects of Property Taxation, Rent Control and Housing Allowances

Tämä väitöskirja koostuu asuntomarkkinoiden taloustieteellistä analyysia esittelevästä johdantoluvusta ja kolmesta tutkimuksesta, joissa analysoidaan asuntomarkkinoihin vaikuttavia politiikkatoimenpiteitä. Luvussa 2 tutkitaan Suomen kiinteistöverojärjestelmän vaikutusta asuntorakentamiseen. Vuonna 2001 tehtiin uudistus, jonka myötä kunnat voivat verottaa rakentamatonta asuintonttia korkeammalla veroasteella kuin rakennettua tonttia. Maanomistajan rakentamispäätöksen teoreettisen mallin mukaan rakentamattoman tontin korotettu kiinteistöveron pitäisi nopeuttaa rakentamista, mutta toisaalta myös rakentamiseen investoitu rahamäärä saattaa muuttua. Asuintonttien kiinteistöverojen yleinen taso ei vaikuta maanomistajan käyttäytymiseen, sillä tontin verotusarvo ei riipu rakentamispäätöksestä. Vain rakentamattoman ja rakennetun tontin veroasteiden erolla on merkitystä. Empiiriset tulokset ovat sopusoinnussa teorian kanssa. Tulosten mukaan prosenttiyksikön nousu rakentamattoman ja rakennetun tontin veroasteiden erossa lisää omakotialoitusten määrää viidellä prosentilla lyhyellä aikavälillä. Luvussa 3 analysoidaan vuokrasääntelystä vuokralaisille aiheutuvia hyötyjä ja haittoja. Vuokrasäännellyissä asunnoissa asuvat kotitaloudet hyötyvät vuokrasääntelystä alhaisen vuokran muodossa. Heille saattaa kuitenkin koitua myös haittaa siitä, että toiveita vastaavan asunnon löytäminen on vuokrasääntelytilanteessa vaikeaa, koska vapaille asunnoille on suuri määrä ottajia. Vapaarahoitteisen vuokra-asuntokannan vuokrien sääntely purettiin Suomessa asteittain vuosina 1992–1995. Tutkimuksen empiiriset tulokset viittaavat siihen, että vuokrasääntelyn aiheuttamista suurista eroista halutun ja todellisen asuntokulutuksen välillä koituvat hyvinvointitappiot kumosivat merkittävän osan matalien vuokrien hyödyistä vuokralaisille. Luvussa 4 tutkitaan Suomen asumistukijärjestelmän kannustinvaikutuksia. Asumistuen määrää rajoittavat asunnon pinta-alalle ja neliövuokralle asetetut ylärajat. Neliövuokrarajoite voidaan tulkita asumisen laatua rajoittavana tekijänä. Tutkimuksen teoreettisessa osassa osoitetaan, että asumistukijärjestelmä luo vahvat kannustimet muuttaa asuntoihin, joissa pinta-ala- ja laaturajoitteet purevat. Empiiristen tulosten mukaan asumistukeen oikeutetut kotitaloudet eivät näytä reagoivan kannusteisiin. Tukeen oikeutettujen kotitalouksien asumisvalinnat suhteessa pinta-ala ja laaturajoitteisiin vastaavat muiden kotitalouksien valintoja ja asunnonvaihdon mahdollistama potentiaalinen asumistuen lisäys ei nosta muuttotodennäköisyyttä. Muuttamiseen liittyvät kustannukset ja vajavaiset tiedot tukijärjestelmästä saattavat selittää heikkoa reagointia asumistuen luomiin kannustimiin. Toinen mahdollinen selitys on asumistuen vajaakäyttö. Tutkimuksen mukaan vain 70–80 prosenttia asumistukeen oikeutetuista kotitalouksista nostaa tukea. Asumistuen hyödyntämisen todennäköisyys riippuu koulutustasosta, tuen määrästä ja tulo-odotuksista.

Hyvinvointivaltion optimaalisen köyhyyspolitiikan määrittelyä

The purpose of this research is to identify the optimal poverty policy for a welfare state. Poverty is defined by income. Policies for reducing poverty are considered primary, and those for reducing inequality secondary. Poverty is seen as a function of the income transfer system within a welfare state. This research presents a method for optimising this function for the purposes of reducing poverty. It is also implemented in the representative population sample within the Income Distribution Data. SOMA simulation model is used. The iterative simulation process is continued until a level of poverty is reached at which improvements can no longer be made. Expenditures and taxes are kept in balance during the process. The result consists of two programmes. The first programme (social assistance programme) was formulated using five social assistance parameters, all of which dealt with the norms of social assistance for adults (€/month). In the second programme (basic benefits programme), in which social assistance was frozen at the legislative level of 2003, the parameter with the strongest poverty reduction effect turned out to be one of the basic unemployment allowances. This was followed by the norm of the national pension for a single person, two parameters related to housing allowance, and the norm for financial aid for students of higher education institutions. The most effective financing parameter measured by gini-coefficient in all programmes was the percent of capital taxation. Furthermore, these programmes can also be examined in relation to their costs. The social assistance programme is significantly cheaper than the basic benefits programme, and therefore with regard to poverty, the social assistance programme is more cost effective than the basic benefits programme. Therefore, public demand for raising the level of basic benefits does not seem to correspond to the most cost effective poverty policy. Raising basic benefits has most effect on reducing poverty within the group of people whose basic benefits are raised. Raising social assistance, on the other hand, seems to have a strong influence on the poverty of all population groups. The most significant outcome of this research is the development of a method through which a welfare state’s income transfer-based safety net, which has severely deteriorated in recent decades, might be mended. The only way of doing so involves either social assistance or some forms of basic benefits and supplementing these by modifying social assistance.

Vaikeavammaisen nuoren aikuistuminen : Yksilöllinen ja erilainen elämänkulku

Transition to adulthood of severely disabled adolescents. Diversity in individual life courses. The focus of this study is to examine the transition to adulthood of severely disabled adolescents as part of their life course. The data for this study were gathered through interviews with nine severely disabled adolescents, who were interviewed several times over a period of eight years. At the beginning of the study the adolescents were between 18 and 24 years old. The informants had severe disabilities manifesting themselves as physical incapacity, cerebral palsy, vision or hearing impairment, neurological disease, or developmental disability. One of the adolescents communicated with symbols. All except one used a wheelchair. As severely disabled adolescents, they received benefits from Kela for persons with severe disabilities, such as the higher-rate or special disability allowance or disability pension, the higher-rate or special pensioners' care allowance, or medical rehabilitation services. The interviews focused on a number of selected themes such as relationships, family, education, work, leisure-time activities, dating, decision-making, independence, happiness, and one s self-image and identity. Data were also derived from interviews with five experts. Two of the experts interviewed were severely disabled themselves. The theoritical foundation of the study lies in perviuos research on the severly disabled, the transition to adulthood and the life course. The method of analysis and interpretation is qualitative and based on interviews with the adolescents. In terms of the analytical process, the focus is on recognizing individual events in the transition process to adulthood and identifying the meanings assigned to them by the adolescents. The narratives also provide a method to shed light on the individuality of the transition. The individual situations of severely disabled adolescents vary, and their disability impacts the range of options available to them as they plan their life course. The medical and social models of disability also have an effect on life courses. Although severely disabled adolescents are able to attain some goals, they remain outsiders in many respects. Key words: Disabled person, severely disabled person, adolescent, transition to adulthood, identity, life course.

Humanitaarisuuden varjossa : Poliittiset tekijät lastensiirroissa Ruotsiin sotiemme aikana ja niiden jälkeen

The evacuation of Finnish children to Sweden during WW II has often been called a small migration . Historical research on this subject is scarce, considering the great number of children involved. The present research has applied, apart from the traditional archive research, the framework of history-culture developed by Rüsen in order to have an all-inclusive approach to the impact of this historical event. The framework has three dimensions: political, aesthetic and cognitive. The collective memory of war children has also been discussed. The research looks for political factors involved in the evacuations during the Winter War and the Continuation War and the post-war period. The approach is wider than a purely humanitarian one. Political factors have had an impact in both Finland and Sweden, beginning from the decision-making process and ending with the discussion of the unexpected consequences of the evacuations in the Finnish Parliament in 1950. The Winter War (30.11.1939 13.3.1940) witnessed the first child transports. These were also the model for future decision making. The transports were begun on the initiative of Swedes Maja Sandler, the wife of the resigned minister of foreign affairs Rickard Sandler, and Hanna Rydh-Munck af Rosenschöld , but this activity was soon accepted by the Swedish government because the humanitarian help in the form of child transports lightened the political burden of Prime Minister Hansson, who was not willing to help Finland militarily. It was help that Finland never asked for and it was rejected at the beginning. The negative response of Minister Juho Koivisto was not taken very seriously. The political forces in Finland supporting child transports were stronger than those rejecting them. The major politicians in support belonged to Finland´s Swedish minority. In addition, close to 1 000 Finnish children remained in Sweden after the Winter War. No analysis was made of the reasons why these children did not return home. A committee set up to help Finland and Norway was established in Sweden in 1941. Its chairman was Torsten Nothin, an influential Swedish politician. In December 1941 he appealed to the Swedish government to provide help to Finnish children under the authority of The International Red Cross. This plea had no results. The delivery of great amounts of food to Finland, which was now at war with Great Britain, had automatically caused reactions among the allies against the Swedish imports through Gothenburg. This included the import of oil, which was essential for the Swedish navy and air force. Oil was later used successfully to force a reduction in commerce between Sweden and Finland. The contradiction between Sweden´s essential political interests and humanitarian help was solved in a way that did not harm the country´s vital political interests. Instead of delivering help to Finland, Finnish children were transported to Sweden through the organisations that had already been created. At the beginning of the Continuation War (25.6.1941 27.4.1945) negative opinion regarding child transports re-emerged in Finland. Karl-August Fagerholm implemented the transports in September 1941. In 1942, members of the conservative parties in the Finnish Parliament expressed their fear of losing the children to the Swedes. They suggested that Finland should withdraw from the inter-Nordic agreement, according to which the adoptions were approved by the court of the country where the child resided. This initiative failed. Paavo Virkkunen, an influential member of the conservative party Kokoomus in Finland, favoured the so-called good-father system, where help was delivered to Finland in the form of money and goods. Virkkunen was concerned about the consequences of a long stay in a Swedish family. The risk of losing the children was clear. The extreme conservative party (IKL, the Patriotic Movement of the Finnish People) wanted to alienate Finland from Sweden and bring Finland closer to Germany. Von Blücher, the German ambassador to Finland, had in his report to Berlin, mentioned the political consequences of the child transports. Among other things, they would bring Finland and Sweden closer to each other. He had also paid attention to the Nordic political orientation in Finland. He did not question or criticize the child transports. His main interest was to increase German political influence in Finland, and the Nordic political orientation was an obstacle. Fagerholm was politically ill-favoured by the Germans, because he had a strong Nordic political disposition and had criticised Germany´s activities in Norway. The criticism of child transports was at the same time criticism of Fagerholm. The official censorship organ of the Finnish government (VTL) denied the criticism of child transports in January 1942. The reasons were political. Statements made by members of the Finnish Parliament were also censored, because it was thought that they would offend the Swedes. In addition, the censorship organ used child transports as a means of active propaganda aimed at improving the relations between the two countries. The Finnish Parliament was informed in 1948 that about 15 000 Finnish children still remained in Sweden. These children would stay there permanently. In 1950 the members of the Agrarian Party in Finland stated that Finland should actively strive to get the children back. The party on the left (SKDL, the Democratic Movement of Finnish People) also focused on the unexpected consequences of the child transports. The Social Democrats, and largely Fagerholm, had been the main force in Finland behind the child transports. Members of the SKDL, controlled by Finland´s Communist Party, stated that the war time authorities were responsible for this war loss. Many of the Finnish parents could not get their children back despite repeated requests. The discussion of the problem became political, for example von Born, a member of the Swedish minority party RKP, related this problem to foreign policy by stating that the request to repatriate the Finnish children would have negative political consequences for the relations between Finland and Sweden. He emphasized expressing feelings of gratitude to the Swedes. After the war a new foreign policy was established by Prime Minister (1944 1946) and later President (1946 1956) Juho Kusti Paasikivi. The main cornerstone of this policy was to establish good relations with the Soviet Union. The other, often forgotten, cornerstone was to simultaneously establish good relations with other Nordic countries, especially Sweden, as a counterbalance. The unexpected results of the child evacuation, a Swedish initiative, had violated the good relations with Sweden. The motives of the Democratic Movement of Finnish People were much the same as those of the Patriotic Movement of Finnish People. Only the ideology was different. The Nordic political orientation was an obstacle to both parties. The position of the Democratic Movement of Finnish People was much better than that of the Patriotic Movement of Finnish People, because now one could clearly see the unexpected results, which included human tragedy for the many families who could not be re-united with their children despite their repeated requests. The Swedes questioned the figure given to the Finnish Parliament regarding the number of children permanently remaining in Sweden. This research agrees with the Swedes. In a calculation based on Swedish population registers, the number of these children is about 7 100. The reliability of this figure is increased by the fact that the child allowance programme began in Sweden in 1948. The prerequisite to have this allowance was that the child be in the Swedish population register. It was not necessary for the child to have Swedish nationality. The Finnish Parliament had false information about the number of Finnish children who remained in Sweden in 1942 and in 1950. There was no parliamentary control in Finland regarding child transports, because the decision was made by one cabinet member and speeches by MPs in the Finnish Parliament were censored, like all criticism regarding child transports to Sweden. In Great Britain parliamentary control worked better throughout the whole war, because the speeches regarding evacuation were not censored. At the beginning of the war certain members of the British Labour Party and the Welsh Nationalists were particularly outspoken about the scheme. Fagerholm does not discuss to any great extent the child transports in his memoirs. He does not evaluate the process and results as a whole. This research provides some possibilities for an evaluation of this sort. The Swedish medical reports give a clear picture of the physical condition of the Finnish children when arriving in Sweden. The transports actually revealed how bad the situation of the poorest children was. According to Titmuss, similar observations were made in Great Britain during the British evacuations. The child transports saved the lives of approximately 2 900 children. Most of these children were removed to Sweden to receive treatment for illnesses, but many among the healthy children were undernourished and some suffered from the effects of tuberculosis. The medical inspection in Finland was not thorough. If you compare the figure of 2 900 children saved and returned with the figure of about 7 100 children who remained permanently in Sweden, you may draw the conclusion that Finland as a country failed to benefit from the child transports, and that the whole operation was a political mistake with far-reaching consequenses. The basic goal of the operation was to save lives and have all the children return to Finland after the war. The difficulties with the repatriation of the children were mainly psychological. The level of child psychology in Finland at that time was low. One may question the report by Professor Martti Kaila regarding the adaptation of children to their families back in Finland. Anna Freud´s warnings concerning the difficulties that arise when child evacuees return are also valid in Finland. Freud viewed the emotional life of children in a way different from Kaila: the physical survival of a small child forces her to create strong emotional ties to the person who is looking after her. This, a characteristic of all small children, occurred with the Finnish children too, and it was something the political decision makers in Finland could not see during and after the war. It is a characteristic of all little children. Yet, such experiences were already evident during the Winter War. The best possible solution had been to limit the child transports only to children in need of medical treatment. Children from large and poor families had been helped by organising meals and by buying food from Denmark with Swedish money. Assisting Finland by all possible means should have been the basic goal of Fagerholm in September 1941, when the offer of child transports came from Sweden. Fagerholm felt gratitude towards the Swedes. The risks became clear to him only in 1943. The war children are today a rather scattered and diffuse group of people. Emotionally, part of these children remained in Sweden after the war. There is no clear collective memory, only individual memories; the collective memory of the war children has partly been shaped later through the activities of the war child associations. The main difference between the children evacuated in Finland (for example from Karelia to safer areas with their families) and the war children, who were sent abroad, is that the war children lack a shared story and experience with their families. They were outsiders . The whole matter is sensitive to many of such mothers and discussing the subject has often been avoided in families. The war-time censorship has continued in families through silence and avoidance and Finnish politicians and Finnish families had to face each other on this issue after the war. The lack of all-inclusive historical research has also prevented the formation of a collective awareness among war children returned to Finland or those remaining permanently abroad.. Knowledge of historical facts will help war-children by providing an opportunity to create an all-inclusive approach to the past. Personal experiences should be regarded as part of a large historical entity shadowed by war and where many political factors were at work in both Finland and Sweden. This means strengthening of the cognitive dimension discussed in Rüsen´s all-inclusive historical approach.

Encouragement and discouragement : Essays on taxation and government expenditure

This thesis consists of an introduction to a topic of optimal use of taxes and government expenditure and three chapters analysing these themes more in depth. Chapter 2 analyses to what extent a given amount of subsidies affects the labour supply of parents. Municipal supplement to the Finnish home care allowance provides exogenous variation to labour supply decision of a parent. This kind of subsidy that is tied to staying at home instead of working is found to have fairly large effect on labour supply decisions of parents. Chapter 3 studies theoretically when it is optimal to provide publicly private goods. In the set up of the model government sets income taxes optimally and provides a private good, if it is beneficial to do so. The analysis results in an optimal provision rule according to which the good should be provided when it lowers the participation threshold into labour force. Chapter 4 investigates what happened to prices and demand when hairdressers value added tax was cut in Finland from 22 per cent to 8 per cent. The pass-through to prices was about half of the full pass-through and no clear indication of increased demand for the services or better employment situation in the sector is found.