Essays on Illegal Activities, Institutions and Economic Growth

In public economics, two extremist views on the functions of a government compete: one emphasizes government working for the public interest to provide value for the citizens, while another regards government mainly as a workhorse for private interests. Moreover, as the sole legitimate authority, the government has the right to define the rules and laws as well as to enforce them. With respect to regulation, two extremes arise: from too little regulation to too much of it. If the government does not function or ceases to exist, the state falls into anarchy or chaos (Somalia). If it regulates too much, it will completely suffocate private activities, which might be considered extralegal (the former Soviet Union). In this thesis I scrutinize the government s interventionist policies and evaluate the question of how to best promote economic well-being. The first two essays assume that the government s policies promote illegal activity. The first paper evaluates the interaction between the government and the mafia, and pays attention to the law enforcement of underground production. We show that the revenue-maximizing government will always monitor the shadow economy, as monitoring contributes to the government s revenue. In general, both legal and illegal firms are hurt by the entry of the mafia. It is, however, plausible that legal firms might benefit by the entry of the mafia if it competes with the government. The second paper tackles the issue of the measurement of the size of the shadow economy. To formulate policies it is essential to know what drives illegal economic activity; is it the tax burden, excess regulation, corruption or a weak legal environment? In this paper we propose an additional explanation for tax evasion and shadow production, namely cultural factors as manifested by religion as determinants of tax morality. According to our findings, Catholic and Protestant countries do not differ in their tax morale. The third paper contributes to the literature discussing the role of the government in promoting economic and productivity growth. Our main result is that, given the complex relationship between economic growth and economic freedom, marketization has not necessarily been beneficial in terms of growth. The last paper builds on traditional growth literature and revisits the debate on convergence clubs arising from demographic transition. We provide new evidence against the idea that countries within a club would converge over time. Instead, we propose that since the demographic transition is a dynamic process, one can expect countries to enter the last regime of stable, modern growth in stages.

Tuloverotuksen reaalinen muuttuminen Suomessa : Kuusikymmentä vuotta verojen vuoristorataa

The study seeks to find out whether the real burden of the personal taxation has increased or decreased. In order to determine this, we investigate how the same real income has been taxed in different years. Whenever the taxes for the same real income for a given year are higher than for the base year, the real tax burden has increased. If they are lower, the real tax burden has decreased. The study thus seeks to estimate how changes in the tax regulations affect the real tax burden. It should be kept in mind that the progression in the central government income tax schedule ensures that a real change in income will bring about a change in the tax ration. In case of inflation when the tax schedules are kept nominally the same will also increase the real tax burden. In calculations of the study it is assumed that the real income remains constant, so that we can get an unbiased measure of the effects of governmental actions in real terms. The main factors influencing the amount of income taxes an individual must pay are as follows: - Gross income (income subject to central and local government taxes). - Deductions from gross income and taxes calculated according to tax schedules. - The central government income tax schedule (progressive income taxation). - The rates for the local taxes and for social security payments (proportional taxation). In the study we investigate how much a certain group of taxpayers would have paid in taxes according to the actual tax regulations prevailing indifferent years if the income were kept constant in real terms. Other factors affecting tax liability are kept strictly unchanged (as constants). The resulting taxes, expressed in fixed prices, are then compared to the taxes levied in the base year (hypothetical taxation). The question we are addressing is thus how much taxes a certain group of taxpayers with the same socioeconomic characteristics would have paid on the same real income according to the actual tax regulations prevailing in different years. This has been suggested as the main way to measure real changes in taxation, although there are several alternative measures with essentially the same aim. Next an aggregate indicator of changes in income tax rates is constructed. It is designed to show how much the taxation of income has increased or reduced from one year to next year on average. The main question remains: How aggregation over all income levels should be performed? In order to determine the average real changes in the tax scales the difference functions (difference between actual and hypothetical taxation functions) were aggregated using taxable income as weights. Besides the difference functions, the relative changes in real taxes can be used as indicators of change. In this case the ratio between the taxes computed according to the new and the old situation indicates whether the taxation has become heavier or easier. The relative changes in tax scales can be described in a way similar to that used in describing the cost of living, or by means of price indices. For example, we can use Laspeyres´ price index formula for computing the ratio between taxes determined by the new tax scales and the old tax scales. The formula answers the question: How much more or less will be paid in taxes according to the new tax scales than according to the old ones when the real income situation corresponds to the old situation. In real terms the central government tax burden experienced a steady decline from its high post-war level up until the mid-1950s. The real tax burden then drifted upwards until the mid-1970s. The real level of taxation in 1975 was twice that of 1961. In the 1980s there was a steady phase due to the inflation corrections of tax schedules. In 1989 the tax schedule fell drastically and from the mid-1990s tax schedules have decreased the real tax burden significantly. Local tax rates have risen continuously from 10 percent in 1948 to nearly 19 percent in 2008. Deductions have lowered the real tax burden especially in recent years. Aggregate figures indicate how the tax ratio for the same real income has changed over the years according to the prevailing tax regulations. We call the tax ratio calculated in this manner the real income tax ratio. A change in the real income tax ratio depicts an increase or decrease in the real tax burden. The real income tax ratio declined after the war for some years. In the beginning of the 1960s it nearly doubled to mid-1970. From mid-1990s the real income tax ratio has fallen about 35 %.

Oral Cancer in Tehran, Iran: An approach for understanding disease burden

Suusyöpä Teheranissa, Iranissa 1993-2003 Tämän väitöskirjan tavoitteena oli kuvata suusyövän yleisyyttä ja siihen vaikuttavia tekijöitä Teheranissa, Iranissa tutkimalla suusyöpäpotilaita, suusyöpäkasvainten ominaisuuksia, potilaille tehtyjä diagnooseja ja niiden viivästymistä sekä heidän selviytymistä sairaudestaan. Suusyöpäkasvainten tietoja kerättiin 1042 suusyöpäpotilaalta. Nämä tiedot kerättiin 30 suurimman Teheranilaissairaalan potilaskortistoista vuosien 1993-2003 ajalta. Eloonjäämisanalyysiä varten tiedot kerättiin vuosien 1996-2003 arkistoista 470 suusyöpä- ja 82 huulisyöpäpotilaan osalta ja heitä seurattiin vuoden 2005 loppuun. Potilaan kokemien ensioireiden ja lopullisen syöpädiagnoosin välistä viivettä varten kerättiin tiedot Teheranilaisista sairaaloista 100 peräkkäisen suusyöpäpotilaan tiedoista vuosien 2004-2006 välillä. Ns diagnostinen viive jaettiin kahteen osaan: 1) ensioireiden ja ensimmäisen sitä seuranneen lääkärikäynnin väli ja 2) ensimmäisen lääkärikäynnin ja lopullisen diagnoosin välinen ero. Useimmat suusyövät olivat pitkälle edenneitä diagnoosin tekemisen hetkellä, kasvain oli siis yli 4 senttimetriä halkaisijaltaan ja/tai kaulan alueen imusolmukkeissa oli jo etäpesäkkeitä. Eloonjäämistodennäköisyys viiden vuoden aikavälillä oli suusyöpäpotilaille 30% ja huulisyöpäpotilaille 62%, mitkä olivat merkittävästi alempia kuin yleisesti länsimaissa vastaavat luvut. Tämä tutkimus osoitti, että keskimääräinen diagnostinen viive oli korkea (7,2 kk, SD 7,5), erityisesti kun niitä verrataan kehittyneimpien terveydenhuoltojärjestelmien vastaaviin tietoihin. Yleensä potilaasta aiheutuva viive oli huomattavan suuri ensioireiden ja lopullisen diagnoosin välisestä ajasta. Tässä tutkimuksessa tehtyjen havaintojen pohjalta on perusteltua esittää kehitettäväksi ennaltaehkäisevä tiedotusohjelma, jossa kansalaiset voisivat saada enemmän tietoa suusyövästä, sen ensioireista jotta he hakeutuisivat aikaisemmin hoitoon. Lisäksi terveydenhoitohenkilöstöä, erityisesti hammaslääkärejä ja suuhygienistejä tulisi kouluttaa varhaisen diagnoosin tekemiseksi, jotta Iranissa tehtävien suusyöpähoitojen lopputulokset paranisivat.

Mammographic mass-screening and future breast cancer burden in Finland

A population-based early detection program for breast cancer has been in progress in Finland since 1987. According to regulations during the study period 1987-2001, free of charge mammography screening was offered every second year to women aged 50-59 years. Recently, the screening service was decided to be extended to age group 50-69. However, the scope of the program is still frequently discussed in public and information about potential impacts of mass-screening practice changes on future breast cancer burden is required. The aim of this doctoral thesis is to present methodologies for taking into account the mass-screening invitation information in breast cancer burden predictions, and to present alternative breast cancer incidence and mortality predictions up to 2012 based on scenarios of the future screening policy. The focus of this work is not on assessing the absolute efficacy but the effectiveness of mass-screening, and, by utilizing the data on invitations, on showing the estimated impacts of changes in an existing screening program on the short-term predictions. The breast cancer mortality predictions are calculated using a model that combines incidence, cause-specific and other cause survival on individual level. The screening invitation data are incorporated into modeling of breast cancer incidence and survival by dividing the program into separate components (first and subsequent rounds and years within them, breaks, and post screening period) and defining a variable that gives the component of the screening program. The incidence is modeled using a Poisson regression approach and the breast cancer survival by applying a parametric mixture cure model, where the patient population is allowed to be a combination of cured and uncured patients. The patients risk to die from other causes than breast cancer is allowed to differ from that of a corresponding general population group and to depend on age and follow-up time. As a result, the effects of separate components of the screening program on incidence, proportion of cured and the survival of the uncured are quantified. According to the predictions, the impacts of policy changes, like extending the program from age group 50-59 to 50-69, are clearly visible on incidence while the effects on mortality in age group 40-74 are minor. Extending the screening service would increase the incidence of localized breast cancers but decrease the rates of non-localized breast cancer. There were no major differences between mortality predictions yielded by alternative future scenarios of the screening policy: Any policy change would have at the most a 3.0% reduction on overall breast cancer mortality compared to continuing the current practice in the near future.

Tax Reform and Payout Policy:Do Shareholder Clienteles or Payout Policy Adjust?

Changes in taxation of corporate dividends offer excellent opportunities to study dividend clientele effects. We explore payout policies and ownership structures around a major tax reform that took place in Finland in 2004. Consistent with dividend clienteles affecting firms’ dividend policy decisions, we find that Finnish firms altered their dividend policies based on the changed tax incentives of their largest shareholders. While firms adjust their payout policies, our results also indicate that ownership structures of Finnish firms also changed around the 2004 reform, consistent with shareholder clienteles adjusting to the new tax system.

Tax havens and their impacts on the non-haven countries

Tax havens have attracted increasing attention from the authorities of non-haven countries. The financial crisis exacerbates the negative attitude to tax havens. Offshore zones are now under strong pressure from the international, both financial and political institutions. Thus, the thesis will focus on the current problem of the modern economy, namely tax havens and their impact on the non-haven countries. This thesis will be based on the several articles, in particular “Tax Competition With Parasitic Tax Havens” by Joel Slemrod and John D. Wilson (University of Michigan, 2009) and “Do Havens Divert Economic Activity” by James R. Hines Jr., C. Fritz Foley and Mihir A. Desai (Ross School of Business, 2005). This paper provides two completely different and contradictory viewpoints on the problem of coexisting tax havens and non-haven countries. There are two models, examined in this work, present two important researches. The first one will be concentrated on the positive effect from tax havens whereas the last model will be focused on the completely negative effect from offshore jurisdictions. The first model gives us a good explanation and proof of its statement why tax havens can positively influence on nearby high-tax countries. It describes that the existence of offshore jurisdictions can stimulate the growth of operations and facilitates economic activity in non-haven countries. In contrast to above mentioned, the model with quite opposite view was presented. This economic model and its analysis confirms the undesirability of the existence of offshore areas. Taking into consideration, that the jurisdictions choose their optimal policy, the elimination of offshores will have positive impact on the rest of countries. The model proofs the statement that full or partial elimination of tax havens raises the equilibrium level of the public good and increases country welfare. According to the following study, it can be concluded that both of the models provide telling arguments to prove their assertions. Thereby both of these points of view have their right to exist. Nevertheless, the ongoing debate concerning this issue still will raise a lot of questions.