Essays on Economic Integration and Labour Demand

This dissertation consists of an introductory section and three essays investigating the effects of economic integration on labour demand by using theoretical models and by empirical analysis. The essays adopt an intra-industry trade approach to specify a theoretical framework of estimation for determining the effects of economic integration on employment. In all the essays the empirical aim is to explore the labour demand consequences of European integration. The first essay analyzes how labour-demand elasticities with own price have changed during the process of economic integration. As a theoretical result, intensified trade competition increases labour-demand elasticity, whereas better advantage of economies of scale decreases labour-demand elasticity by decreasing the elasticity of substitution between differentiated products. Furthermore, if integration gives rise to an increase in input-substitutability and/or outsourcing activities, labour demand will become more elastic. Using data from the manufacturing sector from 1975 to 2002, the empirical results provide support for the hypothesis that European integration has contributed to increased elasticities of total labour demand in Finland. The second essay analyzes how economic integration affects the impact of welfare poli-cies on employment. The essay considers the viability of financing the public sector, i.e. public consumption and social security expenses, by general labour taxation in an economy which has become more integrated into international product markets. The theoretical results of the second essay indicate that, as increased trade competition crowds out better economies of scale, it becomes more costly to maintain welfare systems financed by labour taxation. Using data from European countries for the years 1975 to 2004, the empirical results provide inconsistent evidence for the hypothesis that economic integration has contributed to the distortion effects of welfare policies on employment. The third essay analyzes the impact of profit sharing on employment as a way to introduce wage flexibility into the process of economic integration. The results of the essay suggest that, in theory, the effects of economic integration on the impact of profit sharing on employment clearly depend on a trade-off between intensified competition and better advantage of economies of scale. If product market competition increases, the ability of profit sharing to improve employment through economic integration increases with moderated wages. While, the economic integration associating with market power in turn decrease the possibilities of profit sharing with higher wages to improve employment. Using data from the manufacturing sector for the years 1996 to 2004, the empirical results show that profit-sharing has a positive impact on employment during the process of European integration, but can have ambiguous effects on the stability of employment in Finland.

Essays on Finnish Economic Growth and Productivity, 1860-2005

This study examines Finnish economic growth. The key driver of economic growth was productivity. And the major engine of productivity growth was technology, especially the general purpose technologies (GPTs) electricity and ICT. A new GPT builds on previous knowledge, yet often in an uncertain, punctuated, fashion. Economic history, as well as the Finnish data analyzed in this study, teaches that growth is not a smooth process but is subject to episodes of sharp acceleration and deceleration which are associated with the arrival, diffusion and exhaustion of new general purpose technologies. These are technologies that affect the whole economy by transforming both household life and the ways in which firms conduct business. The findings of previous research, that Finnish economic growth exhibited late industrialisation and significant structural changes were corroborated by this study. Yet, it was not solely a story of manufacturing and structural change was more the effect of than the cause for economic growth. We offered an empirical resolution to the Artto-Pohjola paradox as we showed that a high rate of return on capital was combined with low capital productivity growth. This result is important in understanding Finnish economic growth 1975-90. The main contribution of this thesis was the growth accounting results on the impact of ICT on growth and productivity, as well as the comparison of electricity and ICT. It was shown that ICT s contribution to GDP growth was almost twice as large as electricity s contribution over comparable periods of time. Finland has thus been far more successful as an ICT producer than a producer of electricity. Unfortunately in the use of ICT the results were still more modest than for electricity. During the end of the period considered in this thesis, Finland switched from resource-based to ICT-based growth. However, given the large dependency on the ICT-producing sector, the ongoing outsourcing of ICT production to low wage countries provides a threat to productivity performance in the future. For a developed country only change is constant and history teaches us that it is likely that Finland is obliged to reorganize its economy once again in the digital era.

Analyzing changes in macro-level drivers of country-specific emissions : The role of consumption, technology and trade

Industrial ecology is an important field of sustainability science. It can be applied to study environmental problems in a policy relevant manner. Industrial ecology uses ecosystem analogy; it aims at closing the loop of materials and substances and at the same time reducing resource consumption and environmental emissions. Emissions from human activities are related to human interference in material cycles. Carbon (C), nitrogen (N) and phosphorus (P) are essential elements for all living organisms, but in excess have negative environmental impacts, such as climate change (CO2, CH4 N2O), acidification (NOx) and eutrophication (N, P). Several indirect macro-level drivers affect emissions change. Population and affluence (GDP/capita) often act as upward drivers for emissions. Technology, as emissions per service used, and consumption, as economic intensity of use, may act as drivers resulting in a reduction in emissions. In addition, the development of country-specific emissions is affected by international trade. The aim of this study was to analyse changes in emissions as affected by macro-level drivers in different European case studies. ImPACT decomposition analysis (IPAT identity) was applied as a method in papers I III. The macro-level perspective was applied to evaluate CO2 emission reduction targets (paper II) and the sharing of greenhouse gas emission reduction targets (paper IV) in the European Union (EU27) up to the year 2020. Data for the study were mainly gathered from official statistics. In all cases, the results were discussed from an environmental policy perspective. The development of nitrogen oxide (NOx) emissions was analysed in the Finnish energy sector during a long time period, 1950 2003 (paper I). Finnish emissions of NOx began to decrease in the 1980s as the progress in technology in terms of NOx/energy curbed the impact of the growth in affluence and population. Carbon dioxide (CO2) emissions related to energy use during 1993 2004 (paper II) were analysed by country and region within the European Union. Considering energy-based CO2 emissions in the European Union, dematerialization and decarbonisation did occur, but not sufficiently to offset population growth and the rapidly increasing affluence during 1993 2004. The development of nitrogen and phosphorus load from aquaculture in relation to salmonid consumption in Finland during 1980 2007 was examined, including international trade in the analysis (paper III). A regional environmental issue, eutrophication of the Baltic Sea, and a marginal, yet locally important source of nutrients was used as a case. Nutrient emissions from Finnish aquaculture decreased from the 1990s onwards: although population, affluence and salmonid consumption steadily increased, aquaculture technology improved and the relative share of imported salmonids increased. According to the sustainability challenge in industrial ecology, the environmental impact of the growing population size and affluence should be compensated by improvements in technology (emissions/service used) and with dematerialisation. In the studied cases, the emission intensity of energy production could be lowered for NOx by cleaning the exhaust gases. Reorganization of the structure of energy production as well as technological innovations will be essential in lowering the emissions of both CO2 and NOx. Regarding the intensity of energy use, making the combustion of fuels more efficient and reducing energy use are essential. In reducing nutrient emissions from Finnish aquaculture to the Baltic Sea (paper III) through technology, limits of biological and physical properties of cultured fish, among others, will eventually be faced. Regarding consumption, salmonids are preferred to many other protein sources. Regarding trade, increasing the proportion of imports will outsource the impacts. Besides improving technology and dematerialization, other viewpoints may also be needed. Reducing the total amount of nutrients cycling in energy systems and eventually contributing to NOx emissions needs to be emphasized. Considering aquaculture emissions, nutrient cycles can be partly closed through using local fish as feed replacing imported feed. In particular, the reduction of CO2 emissions in the future is a very challenging task when considering the necessary rates of dematerialisation and decarbonisation (paper II). Climate change mitigation may have to focus on other greenhouse gases than CO2 and on the potential role of biomass as a carbon sink, among others. The global population is growing and scaling up the environmental impact. Population issues and growing affluence must be considered when discussing emission reductions. Climate policy has only very recently had an influence on emissions, and strong actions are now called for climate change mitigation. Environmental policies in general must cover all the regions related to production and impacts in order to avoid outsourcing of emissions and leakage effects. The macro-level drivers affecting changes in emissions can be identified with the ImPACT framework. Statistics for generally known macro-indicators are currently relatively well available for different countries, and the method is transparent. In the papers included in this study, a similar method was successfully applied in different types of case studies. Using transparent macro-level figures and a simple top-down approach are also appropriate in evaluating and setting international emission reduction targets, as demonstrated in papers II and IV. The projected rates of population and affluence growth are especially worth consideration in setting targets. However, sensitivities in calculations must be carefully acknowledged. In the basic form of the ImPACT model, the economic intensity of consumption and emission intensity of use are included. In seeking to examine consumption but also international trade in more detail, imports were included in paper III. This example demonstrates well how outsourcing of production influences domestic emissions. Country-specific production-based emissions have often been used in similar decomposition analyses. Nevertheless, trade-related issues must not be ignored.

Operationalizing Supply Chain vs. Supply Chain Competion

Competition is an immensely important area of study in economic theory, business and strategy. It is known to be vital in meeting consumers’ growing expectations, stimulating increase in the size of the market, pushing innovation, reducing cost and consequently generating better value for end users, among other things. Having said that, it is important to recognize that supply chains, as we know it, has changed the way companies deal with each other both in confrontational or conciliatory terms. As such, with the rise of global markets and outsourcing destinations, increased technological development in transportation, communication and telecommunications has meant that geographical barriers of distance with regards to competition are a thing of the past in an increasingly flat world. Even though the dominant articulation of competition within management and business literature rests mostly within economic competition theory, this thesis draws attention to the implicit shift in the recognition of other forms of competition in today’s business environment, especially those involving supply chain structures. Thus, there is popular agreement within a broad business arena that competition between companies is set to take place along their supply chains. Hence, management’s attention has been focused on how supply chains could become more aggressive making each firm in its supply chain more efficient. However, there is much disagreement on the mechanism through which such competition pitching supply chain against supply chain will take place. The purpose of this thesis therefore, is to develop and conceptualize the notion of supply chain vs. supply chain competition, within the discipline of supply chain management. The thesis proposes that competition between supply chains may be carried forward via the use of competition theories that emphasize interaction and dimensionality, hence, encountering friction from a number of sources in their search for critical resources and services. The thesis demonstrates how supply chain vs. supply chain competition may be carried out theoretically, using generated data for illustration, and practically using logistics centers as a way to provide a link between theory and corresponding practice of this evolving competition mode. The thesis concludes that supply chain vs. supply chain competition, no matter the conceptualization taken, is complex, novel and can be very easily distorted and abused. It therefore calls for the joint development of regulatory measures by practitioners and policymakers alike, to guide this developing mode of competition.

Työntekijän näkökulmat ja oppiminen ulkoistusprojektissa : "Aluks pelkää muutosta ja sit pelkää, ettei mikään muutukaan."

The aim of this master s thesis was to clarify employees views on outsourcing. The main questions of the study were 1) How the employees dealt with the change created by outsourcing and what things they felt important when implementing the change? 2) What kind of organizational questions the employees paid attention to when moving from one organization to another? 3) What kind of management issues the employees brought up in the outsourcing process? and 4) How the employees reflected change while experienced outsourcing? The theoretical foundations of the study were Jack Mezirow s theory of transformational learning and Yrjö Engeström s theory of expansive learning. The management of outsourcing was viewed by John P. Kotter s change management model. Research casted light on transformation and learning on four levels of analysis: on individual, organizational and management levels and on the level of reflection. The target of the study were the outsourced employees, who were moved from a Finnish public corporation to a private ITC organization along with the services they produce. The study material was eleven interviews from the outsourced employees. The study was implemented by fenomenographical theme analysis. The analysis revealed results in all four levels. On the individual level the main results were the importance of systematic and open information, meaning of social and technical integration and the feeling of employee s own control. On the organizational level the move from the public sector to private and all the changes in organizational culture and in fringe benefitswere fundamental. Organizational learning was analyzed with expansive learning theory. Expanding was perceived in four dimensions: temporal dimension, spatial dimension, responsibility-moral dimension and developmental dimension. On the management level the actions of one s closest manager was vital, as was the upper management s clear engagement and a shared view of the necessity of a change. In the data was found employees reflective talking, which was indicating the meaning of the change and which was interpreted from the learning point of view. According to this study, it is possible to identify and analyze reflective talk and that way have information about employees learning in an organizational change. It was prominent to notice how reflection in the process of outsourcing is extremely versatile and extensive.