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.

Examining effectiveness of an immigrant labor market integration intervention. The role of acculturation, discrimination, self-efficacy, outcome expectances, action and coping planning.

The designing of effective intervention tools to improve immigrants’ labor market integration remains an important topic in contemporary Western societies. This study examines whether and how a new intervention tool, Working Life Certificate (WLC), helps unemployed immigrants to find employment and strengthen their belief of their vocational skills. The study is based on quantitative longitudinal survey data from 174 unemployed immigrants of various origins who participated in the pilot phase of WLC examinations in 2009. Surveys were administered in three waves: before the test, right after it, and three months later. Although it is often argued that the unemployment among immigrants is due either to their lack of skills and cultural differences or to discrimination in recruitment, scholars within social psychology of behavior change argue that the best way of helping people to achieve their goals (e.g. finding employment) is to build up their sense of self-efficacy, alter their outcome expectances in a more positive direction or to help them to construct more detailed action and coping plans. This study aims to shed light on the role of these concepts in immigrants’ labor market integration. The results support the theories of behavior change moderately. Having positive expectances regarding the outcomes of various job search behaviors was found to predict employment in the future. Together with action and coping planning it also predicted increase in job search behavior. The intervention, WLC, was able to affect participants’ self-efficacy, but contrary to expectations, self-efficacy was found not to be related to either job search behavior or future labor market status. Also, perceived discrimination did not explain problems in finding employment, but hints of subtle or structural discrimination were found. Adoption of Finnish work culture together with strong family culture was found to predict future employment. Hence, in this thesis I argue that awarding people diplomas should be preferred in immigrant integration training as it strengthens people’s sense of self-efficacy. Instead of teaching new information, more attention should be directed at changing people’s outcome expectances in a more positive direction and helping them to construct detailed plans on how to achieve their goals.

A modell of socially optimal hydro reservoir usage - yelding socially optimal outcomes in nordic electricity markets

An extensive electricity transmission network facilitates electricity trading between Finland, Sweden, Norway and Denmark. Currently most of the area's power generation is traded at NordPool, where the trading volumes have steadily increased since the early 1990's, when the exchange was founded. The Nordic electricity is expected to follow the current trend and further integrate with the other European electricity markets. Hydro power is the source for roughly a half of the supply in the Nordic electricity market and most of the hydro is generated in Norway. The dominating role of hydro power distinguishes the Nordic electricity market from most of the other market places. Production of hydro power varies mainly due to hydro reservoirs and demand for electricity. Hydro reservoirs are affected by water inflows that differ each year. The hydro reservoirs explain remarkably the behaviour of the Nordic electricity markets. Therefore among others, Kauppi and Liski (2008) have developed a model that analyzes the behaviour of the markets using hydro reservoirs as explanatory factors. Their model includes, for example, welfare loss due to socially suboptimal hydro reservoir usage, socially optimal electricity price, hydro reservoir storage and thermal reservoir storage; that are referred as outcomes. However, the model does not explain the real market condition but rather an ideal situation. In the model the market is controlled by one agent, i.e. one agent controls all the power generation reserves; it is referred to as a socially optimal strategy. Article by Kauppi and Liski (2008) includes an assumption where an individual agent has a certain fraction of market power, e.g. 20 % or 30 %. In order to maintain the focus of this thesis, this part of their paper is omitted. The goal of this thesis is two-fold. Firstly we expand the results from the socially optimal strategy for years 2006-08, as the earlier study finishes in 2005. The second objective is to improve on the methods from the previous study. This thesis results several outcomes (SPOT-price and welfare loss, etc.) due to socially optimal actions. Welfare loss is interesting as it describes the inefficiency of the market. SPOT-price is an important output for the market participants as it often has an effect on end users' electricity bills. Another function is to modify and try to improve the model by means of using more accurate input data, e.g. by considering pollution trade rights effect on input data. After modifications to the model, new welfare losses are calculated and compared with the same results before the modifications. The hydro reservoir has the higher explanatory significance in the model followed by thermal power. In Nordic markets, thermal power reserves are mostly nuclear power and other thermal sources (coal, natural gas, oil, peat). It can be argued that hydro and thermal reservoirs determine electricity supply. Roughly speaking, the model takes into account electricity demand and supply, and several parameters related to them (water inflow, oil price, etc.), yielding finally the socially optimal outcomes. The author of this thesis is not aware of any similar model being tested before. There have been some other studies that are close to the Kauppi and Liski (2008) model, but those have a somewhat different focus. For example, a specific feature in the model is the focus on long-run capacity usage that differs from the previous studies on short-run market power. The closest study to the model is from California's wholesale electricity markets that, however, uses different methodology. Work is constructed as follows.

Virtual versus classroom language teaching : A comparative study of the learning outcomes and student responses between two English reading comprehension groups

A 26-hour English reading comprehension course was taught to two groups of second year Finnish Pharmacy students: a virtual group (33 students) and a teacher-taught group (25 students). The aims of the teaching experiment were to find out: 1.What has to be taken into account when teaching English reading comprehension to students of pharmacy via the Internet and using TopClass? 2. How will the learning outcomes of the virtual group and the control group differ? 3. How will the students and the Department of Pharmacy respond to the different and new method, i.e. the virtual teaching method? 4. Will it be possible to test English reading comprehension learning material using the groupware tool TopClass? The virtual exercises were written within the Internet authoring environment, TopClass. The virtual group was given the reading material and grammar booklet on paper, but they did the reading comprehension tasks (written by the teacher), autonomously via the Internet. The control group was taught by the same teacher in 12 2-hour sessions, while the virtual group could work independently within the given six weeks. Both groups studied the same material: ten pharmaceutical articles with reading comprehension tasks as well as grammar and vocabulary exercises. Both groups took the same final test. Students in both groups were asked to evaluate the course using a 1 to 5 rating scale and they were also asked to assess their respective courses verbally. A detailed analysis of the different aspects of the student evaluation is given. Conclusions: 1.The virtual students learned pharmaceutical English relatively well but not significantly better than the classroom students 2. The overall student satisfaction in the virtual pharmacy English reading comprehension group was found to be higher than that in the teacher-taught control group. 3. Virtual learning is easier for linguistically more able students; less able students need more time with the teacher. 4. The sample in this study is rather small, but it is a pioneering study. 5. The Department of Pharmacy in the University of Helsinki wishes to incorporate virtual English reading comprehension teaching in its curriculum. 6. The sophisticated and versatile TopClass system is relatively easy for a traditional teacher and quite easy for the students to learn. It can be used e.g. for automatic checking of routine answers and document transfer, which both lighten the workloads of both parties. It is especially convenient for teaching reading comprehension. Key words: English reading comprehension, teacher-taught class, virtual class, attitudes of students, learning outcomes

Effect of waiting time on health outcomes and service utilization : A prospective randomized study on patients admitted to hospital for hip or knee replacement

Although the principle of equal access to medically justified treatment has been promoted by official health policies in many Western health care systems, practices do not completely meet policy targets. Waiting times for elective surgery vary between patient groups and regions, and growing problems in the availability of services threaten equal access to treatment. Waiting times have come to the attention of decision-makers, and several policy initiatives have been introduced to ensure the availability of care within a reasonable time. In Finland, for example, the treatment guarantee came into force in 2005. However, no consensus exists on optimal waiting time for different patient groups. The purpose of this multi-centre randomized controlled trial was to analyse health-related quality of life, pain and physical function in total hip or knee replacement patients during the waiting time and to evaluate whether the waiting time is associated with patients health outcomes at admission. This study also assessed whether the length of waiting time is associated with social and health services utilization in patients awaiting total hip or knee replacement. In addition, patients health-related quality of life was compared with that of the general population. Consecutive patients with a need for a primary total hip or knee replacement due to osteoarthritis were placed on the waiting list between August 2002 and November 2003. Patients were randomly assigned to a short waiting time (maximum 3 months) or a non-fixed waiting time (waiting time not fixed in advance, instead the patient followed the hospitals routine practice). Patients health-related quality of life was measured upon being placed on the waiting list and again at hospital admission using the generic 15D instrument. Pain and physical function were evaluated using the self-report Harris Hip Score for hip patients and a scale modified from the Knee Society Clinical Rating System for knee patients. Utilization measures were the use of home health care, rehabilitation and social services, physician visits and inpatient care. Health and social services use was low in both waiting time groups. The most common services used while waiting were rehabilitation services and informal care, including unpaid care provided by relatives, neighbours and volunteers. Although patients suffered from clear restrictions in usual activities and physical functioning, they seemed primarily to lean on informal care and personal networks instead of professional care. While longer waiting time did not result in poorer health-related quality of life at admission and use of services during the waiting time was similar to that at the time of placement on the list, there is likely to be higher costs of waiting by people who wait longer simply because they are using services for a longer period. In economic terms, this would represent a negative impact of waiting. Only a few reports have been published of the health-related quality of life of patients awaiting total hip or knee replacement. These findings demonstrate that, in addition to physical dimensions of health, patients suffered from restrictions in psychological well-being such as depression, distress and reduced vitality. This raises the question of how to support patients who suffer from psychological distress during the waiting time and how to develop strategies to improve patients initiatives to reduce symptoms and the burden of waiting. Key words: waiting time, total hip replacement, total knee replacement, health-related quality of life, randomized controlled trial, outcome assessment, social service, utilization of health services

The Impact of Emissions Trading on the Price of Electricity in Nord Pool : Market Power and Price Determination in the Nordic Electricity Market

The objective of this thesis is to find out how dominant firms in a liberalised electricity market will react when they face an increase in the level of costs due to emissions trading, and how this will effect the price of electricity. The Nordic electricity market is chosen as the setting in which to examine the question, since recent studies on the subject suggest that interaction between electricity markets and emissions trading is very much dependent on conditions specific to each market area. There is reason to believe that imperfect competition prevails in the Nordic market, thus the issue is approached through the theory of oligopolistic competition. The generation capacity available at the market, marginal cost of electricity production and seasonal levels of demand form the data based on which the dominant firms are modelled using the Cournot model of competition. The calculations are made for two levels of demand, high and low, and with several values of demand elasticity. The producers are first modelled under no carbon costs and then by adding the cost of carbon dioxide at 20€/t to those technologies subject to carbon regulation. In all cases the situation under perfect competition is determined as a comparison point for the results of the Cournot game. The results imply that the potential for market power does exist on the Nordic market, but the possibility for exercising market power depends on the demand level. In season of high demand the dominant firms may raise the price significantly above competitive levels, and the situation is aggravated when the cost of carbon dioixide is accounted for. Under low demand leves there is no difference between perfect and imperfect competition. The results are highly dependent on the price elasticity of demand.

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.

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.

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

Long-term outcomes of esophageal atresia

Esophageal atresia (EA), a common congenital anomaly comprising interrupted esophagus with or without a tracheoesophageal fistula (TEF), affects one in 2840 newborns. Over half have associated anomalies. After EA repair in infancy, gastroesophageal reflux (GER) and esophageal dysmotility and respiratory problems are common. As there exist no previous population-based long-term follow-up-studies on EA, its long-term sequelae are unclear. The aims of this study were to assess the cancer incidence (I), esophageal morbidity and function (II), respiratory morbidity (III), and the spinal defects (IV) in adults with repaired EA. All patients treated for EA at the Hospital for Children and Adolescents, University of Helsinki, from 1947 to 1985 were identified, and those alive with their native esophagus were contacted, and the first hundred who replied made up the study group. The patients were interviewed, they filled in symptom questionnaires, and they underwent esophageal endoscopy and manometry, pulmonary function tests, and a full orthopedic evaluation was performed with radiographs of the spine. The questionnaire was also sent by mail to adults with repaired EA not attending the clinical study, and to 287 general population-derived controls matched for age, gender, and municipality of residence. Incidence of cancer among the study population was evaluated from the population-based countrywide cancer registry. 169 (72%) adults with repaired EA replied; 101 (42%) (58 male) participated in the clinical studies at a median age of 36 years (range, 22-56). Symptomatic GER occurred in 34% and dysphagia in 85% of the patients and in 8% and 2% of the controls (P<0.001 for both). The main endoscopic findings included hiatal hernia (28%), Barrett´s esophagus (11%), esophagitis (8%), and stenotic anastomosis (8%). Histology revealed esophagitis in 25 individuals, and epithelial metaplasia in another 21. At immunohistochemistry, CDX2-positive columnar epithelial metaplasia was present in all 21 individuals, and 6 of these also demonstrated goblet cells and MUC2 positivity. In all histological groups, GER and dysphagia were equally common (P=ns). Esophageal manometry demonstrated non-propagating peristalsis in most of the patients, and low ineffective pressure of the distal esophageal body in all. The changes were significantly worse in those with epithelial metaplasia (P≤0.022). Anastomotic complications (OR 8.6-24, 95%CI 1.7-260, P=0.011-0.008), age (OR 20, 95%CI 1.3-310, P=0.034), low distal esophageal body pressure (OR 2.6, 95%CI 0.7-10, P=0.002), and defective esophageal peristalsis (OR 2.2, 95%CI 0.4-11, P=0.014) all predicted development of epithelial metaplasia. Despite the high incidence of esophageal metaplasia, none of the EA patients had suffered esophageal cancer, according to the Finnish Cancer Registry. Although three had had cancer (SIR, 1.0; 95% CI, 0.20-2.8). The overall cancer incidence among adults with repaired EA did not differ from that of the general Finnish population. Current respiratory symptoms occurred in 11% of the patients and 2% of the controls (P<0.001). Of the patients, 16%, and 6% of the controls had doctor-diagnosed asthma (P<0.001). A total of 56% and 70% of the patients and 20% and 50% of the controls had a history of pneumonia and of bronchitis (P<0.001 for both). Respiratory-related impaired quality of life was observable in 11% of the patients in contrast to 6% of the controls (P<0.001). PFT revealed obstruction in 21 of the patients, restriction in 21, and both in 36. A total of 41 had bronchial hyper-responsiveness (BHR) in HCT, and 15 others had an asthma-like response. Thoracotomy-induced rib fusion (OR 3.4, 95%CI 1.3-8.7, P=0.01) and GER-associated epithelial metaplasia in adulthood (OR 3.0, 95%CI 1.0-8.9, P=0.05) were the most significant risk factors for restrictive ventilatory defect. Vertebral anomalies were evident in 45 patients, predominating in the cervical spine in 38. The most significant risk factor for the occurrence of vertebral anomalies was any additional anomaly (OR 27, 95%C I8-100). Scoliosis (over 10 degrees) was observable in 56 patients, over 20 degrees in 11, and over 45 degrees in one. In the EA patients, risk for scoliosis over 10 degrees was 13-fold (OR 13, 95%CI 8.3-21) and over 20 degrees, 38-fold (OR 38, 95%CI 14-106) when compared to that of the general population. Thoracotomy-induced rib fusion (OR 3.6, 95%CI 0.7-19) and other associated anomalies (OR 2.1, 95%CI 0.9-2.9) were the strongest predictive factors for scoliosis. Significant esophageal morbidity associated with EA extends into adulthood. No association existed between the esophageal symptoms and histological findings. Surgical complications, increasing age, and impaired esophageal motility predicted development of epithelial metaplasia after repair of EA. According to our data, the risk for esophageal cancer is less than 500-fold that of the general population. However, the overall cancer incidence among adults with repaired EA did not differ from that of the general population. Adults with repaired EA have had significantly more respiratory symptoms and infections, as well as more asthma, and allergies than does the general population. Thoracotomy-induced rib fusion and GER-associated columnar epithelial metaplasia were the most significant risk factors for the restrictive ventilatory defect that occurred in over half the patients. Over half the patients with repaired EA are likely to develop scoliosis. Risk for scoliosis is 13-fold after repair of EA in relation to that of the general population. Nearly half the patients had vertebral anomalies. Most of these deformities were diagnosed neither in infancy nor during growth. The natural history of spinal deformities seems, however, rather benign, with spinal surgery rarely indicated.

Outcomes of ruptured abdominal aortic aneurysm

Ruptured abdominal aortic aneurysm (RAAA) is a life-threatening event, and without operative treatment the patient will die. The overall mortality can be as high as 80-90%; thus repair of RAAA should be attempted whenever feasible. The quality of life (QoL) has become an increasingly important outcome measure in vascular surgery. Aim of the study was to evaluate outcomes of RAAA and to find out predictors of mortality. In Helsinki and Uusimaa district 626 patients were identified to have RAAA in 1996-2004. Altogether 352 of them were admitted to Helsinki University Central Hospital (HUCH). Based on Finnvasc Registry, 836 RAAA patients underwent repair of RAAA in 1991-1999. The 30-day operative mortality, hospital and population-based mortality were assessed, and the effect of regional centralisation and improving in-hospital quality on the outcome of RAAA. QoL was evaluated by a RAND-36 questionnaire of survivors of RAAA. Quality-adjusted life years (QALYs), which measure length and QoL, were calculated using the EQ-5D index and estimation of life expectancy. The predictors of outcome after RAAA were assessed at admission and 48 hours after repair of RAAA. The 30-day operative mortality rate was 38% in HUCH and 44% nationwide, whereas the hospital mortality was 45% in HUCH. Population-based mortality was 69% in 1996-2004 and 56% in 2003-2004. After organisational changes were undertaken, the mortality decreased significantly at all levels. Among the survivors, the QoL was almost equal when compared with norms of age- and sex-matched controls; only physical functioning was slightly impaired. Successful repair of RAAA gave a mean of 4.1 (0-30.9) QALYs for all RAAA patients, although non-survivors were included. The preoperative Glasgow Aneurysm Score was an independent predictor of 30-day operative mortality after RAAA, and it also predicted the outcome at 48- hours for initial survivors of repair of RAAA. A high Glasgow Aneurysm Score and high age were associated with low numbers of QALYs to be achieved. Organ dysfunction measured by the Sequential Organ Failure Assessment (SOFA) score at 48 hours after repair of RAAA was the strongest predictor of death. In conclusion surgery of RAAA is a life-saving and cost-effective procedure. The centralisation of vascular emergencies improved the outcome of RAAA patients. The survivors had a good QoL after RAAA. Predictive models can be used on individual level only to provide supplementary information for clinical decision-making due to their moderate discriminatory value. These results support an active operation policy, as there is no reliable measure to predict the outcome after RAAA.

Vaikuttavuusyhteiskunta : Sosiaalisten olojen arvostelusta vaikutusten todentamiseen

Evaluation practices have pervaded the Finnish society and welfare state. At the same time the term effectiveness has become a powerful organising concept in welfare state activities. The aim of the study is to analyse how the outcome-oriented society came into being through historical processes, to answer the question of how social policy and welfare state practices were brought under the governance of the concept of effectiveness . Discussions about social imagination, Michel Foucault s conceptions of the history of the present and of governmentality, genealogy and archaeology, along with Ian Hacking s notions of dynamic nominalism and styles of reasoning, are used as the conceptual and methodological starting points for the study. In addition, Luc Boltanski s and Laurent Thévenot s ideas of orders of worth , regimes of evaluation in everyday life, are employed. Usually, evaluation is conceptualised as an autonomous epistemic culture and practice (evaluation as epistemic practice), but evaluation is here understood as knowledge-creation processes elementary to different epistemic practices (evaluation in epistemic practices). The emergence of epistemic cultures and styles of reasoning about the effectiveness or impacts of welfare state activities are analysed through Finnish social policy and social work research. The study uses case studies which represent debates and empirical research dealing with the effectiveness and quality of social services and social work. While uncertainty and doubts over the effects and consequences of welfare policies have always been present in discourses about social policy, the theme has not been acknowledged much in social policy research. To resolve these uncertainties, eight styles of reasoning about such effects have emerged over time. These are the statistical, goal-based, needs-based, experimental, interaction-based, performance measurement, auditing and evidence-based styles of reasoning. Social policy research has contributed in various ways to the creation of these epistemic practices. The transformation of the welfare state, starting at the end of 1980s, increased market-orientation and trimmed public welfare responsibilities, and led to the adoption of the New Public Management (NPM) style of leadership. Due to these developments the concept of effectiveness made a breakthrough, and new accountabilities with their knowledge tools for performance measurement and auditing and evidence-based styles of reasoning became more dominant in the ruling of the welfare state. Social sciences and evaluation have developed a heteronomous relation with each other, although there still remain divergent tendencies between them. Key words: evaluation, effectiveness, social policy, welfare state, public services, sociology of knowledge