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 Roughly half of the unemployed workers with extended benefits are estimated to be effectively withdrawn from labour market search.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.

Essays on labour demand and wage formation

The first essay in this thesis is on gender wage differentials among manufacturing sector white-collar workers. The wage differential is decomposed into firm, job (within-firm) and individ-ual-level components. Job-level gender segregation explains over half of the gap, while firm-level segregation is not important. After controlling for firm, job and individual characteristics, the remaining unexplained wage cap to the advantage of men is six per cent of men s mean wage. In the second essay, I study how the business cycle and gender affect the distribution of the earnings losses of displaced workers. The negative effect of displacement is large, persistent and strongest in the lowest earnings deciles. The effect is larger in a recession than in a recov-ery period, and in all periods women s earnings drop more than men s earnings. The third essay shows that the transition from steady employment to disability pension de-pends on the stringency of medical screening and the degree of experience-rating of pension costs applied to the employer. The fact that firms have to bear part of the cost of employees disability pension costs lowers both the incidence of long sick leave periods and the probabil-ity that sick leave ends in a disability pension. The fourth and fifth essays are studies on the employment, wage and profit effects of a re-gional payroll tax cut experiment conducted in northern and eastern Finland. The results show no statistically significant effect on any of the response variables.

The Roman Republican Navy : from the sixth century to 167 BC

Työ käsittelee Rooman laivaston kehitystä, toimintaa ja osallistumista laajenemispolitiikkaan, jossa Rooma kasvoi kaupunkivaltiosta Välimeren hallitsijaksi. Rooma on aikaisemmissa tutkimuksissa nähty maavaltiona vailla kiinnostusta merenkulkuun. On katsottu, että ainoa merkittävä merisota Rooman historiassa on ensimmäinen puunilaissota (264-241 eKr.) ja että siinäkin roomalaiset (jotka historioitsija Polybius kuvaa vasta-alkajiksi) menestyivät Karthagoa vastaan turvautumalla laskusiltoihin, joiden avulla he saattoivat muuttaa meritaistelun maataisteluksi. Polybiuksen kuvaukseen on aina tähän asti luotettu. On katsottu että Roomalla ei ollut laivastoa ennen ensimmäistä puunilaissotaa ja että Rooma kaikissa sodissaan panosti merisodankäyntiin mahdollisimman vähän. Tämä työ pyrkii kumoamaan nämä käsitykset. Laivasto oli osallisena ja ehdottoman välttämätön kaikissa Rooman laajenemispolitiikan käänteissä. Arkeologian tiedot osoittavat, että ennen ensimmäistä puunilaissotaa Rooma kehittyi ja siitä tuli merkittävä kaupunki nimenomaan kaupankäynnin ja ulkomaisten kontaktien seurauksena. Se ei siis ollut puhdas agraarivaltio. Roomalaisilla oli laivasto jo viimeistään 500-luvulta lähtien eKr. ja sitä käytettiin Rooman laajentaessa valtaansa Italiassa. Näin ollen ensimmäisessä puunilaissodassa läntisen Välimeren herruudesta kilpaili kaksi merivaltiota, Rooma ja Karthago. Toinen puunilaissota (218-201) tunnetaan yleensä Hannibalin tulosta Alppien yli Italiaan, mutta se oli myöskin merkittävä merisota ja karthagolaiset hävisivät sen nimenomaan merellä. Rooma osallistui kilpailuun itäisen Välimeren hallinnasta ja kukisti Makedonian ja Syyrian laivastot, jotka eivät olleet mitenkään Rooman laivaston veroisia. Kaikista Rooman vastustajista Karthagolla olisi ollut suurin mahdollisuus pysäyttää Rooman laivaston voittokulu toisessa puunilaissodassa. Laivastoa käytettiin moniin eri tarkoituksiin. Suuret meritaistelut eivät ole ainoa osoitus laivastojen mukanaolosta ja merkityksestä, vaan on myös otettava huomion sotalaivojen rakenne ja toimintaedellytykset. Sotalaivat oli rakennettu taisteluita varten ja niissä oli hyvin niukasti säilytystilaa. Niiden oli päästävä laskemaan maihin aina kun miehistö tarvitsi vettä, ruokaa ja lepoa. Laivastot saattoivat toimia vain niiden rannikoiden tuntumassa, joiden satamiin ja laskupaikkoihin niillä oli turvallinen pääsy. Roomalaiset olivat hyvin tietoisia tästä. Suuret merentakaiset sotaretket Afrikkaan, Espanjaan, Kreikkaan ja Vähän-Aasian rannikolle perustuivat kaikki siihen, että Rooman laivasto hallitsi purjehdusreittejä ja sopivia laskupaikkoja ja saattoi huolehtia joukkojen ja varusteiden kuljettamisesta kaukana taisteleville armeijoille. Samalla Rooman laivasto kävi itsenäistä sotaa merellä ja haastoi ja kukisti kaikki Välimeren merivaltiot. 130-luvulle eKr. tultaessa se oli lyönyt vihollisensa ja riisunut aseista liittolaisensa; Rooman laivasto hallitsi Välimerta yksin.

Microeconometric Studies on Unemployment and Business Cycles

Väitöskirja koostuu neljästä esseestä, joissa tutkitaan empiirisen työntaloustieteen kysymyksiä. Ensimmäinen essee tarkastelee työttömyysturvan tason vaikutusta työllistymiseen Suomessa. Vuonna 2003 ansiosidonnaista työttömyysturvaa korotettiin työntekijöille, joilla on pitkä työhistoria. Korotus oli keskimäärin 15 % ja se koski ensimmäistä 150 työttömyyspäivää. Tutkimuksessa arvioidaan korotuksen vaikutus vertailemalla työllistymisen todennäköisyyksiä korotuksen saaneen ryhmän ja vertailuryhmän välillä ennen uudistusta ja sen jälkeen. Tuloksien perusteella työttömyysturvan korotus laski työllistymisen todennäköisyyttä merkittävästi, keskimäärin noin 16 %. Korotuksen vaikutus on suurin työttömyyden alussa ja se katoaa kun oikeus korotettuun ansiosidonnaiseen päättyy. Toinen essee tutkii työttömyyden pitkän aikavälin kustannuksia Suomessa keskittyen vuosien 1991 – 1993 syvään lamaan. Laman aikana toimipaikkojen sulkeminen lisääntyi paljon ja työttömyysaste nousi yli 13 prosenttiyksikköä. Tutkimuksessa verrataan laman aikana toimipaikan sulkemisen vuoksi työttömäksi jääneitä parhaassa työiässä olevia miehiä työllisinä pysyneisiin. Työttömyyden vaikutusta tarkastellaan kuuden vuoden seurantajaksolla. Vuonna 1999 työttömyyttä laman aikana kokeneen ryhmän vuosiansiot olivat keskimäärin 25 % alemmat kuin vertailuryhmässä. Tulojen menetys johtui sekä alhaisemmasta työllisyydestä että palkkatasosta. Kolmannessa esseessä tarkastellaan Suomen 1990-luvun alun laman aiheuttamaa työttömyysongelmaa tutkimalla työttömyyden kestoon vaikuttavia tekijöitä yksilötasolla. Kiinnostuksen kohteena on työttömyyden rakenteen ja työn kysynnän muutoksien vaikutus keskimääräiseen kestoon. Usein oletetaan, että laman seurauksena työttömäksi jää keskimääräistä huonommin työllistyviä henkilöitä, jolloin se itsessään pidentäisi keskimääräistä työttömyyden kestoa. Tuloksien perusteella makrotason kysyntävaikutus oli keskeinen työttömyyden keston kannalta ja rakenteen muutoksilla oli vain pieni kestoa lisäävä vaikutus laman aikana. Viimeisessä esseessä tutkitaan suhdannevaihtelun vaikutusta työpaikkaonnettomuuksien esiintymiseen. Tutkimuksessa käytetään ruotsalaista yksilötason sairaalahoitoaineistoa, joka on yhdistetty populaatiotietokantaan. Aineiston avulla voidaan tutkia vaihtoehtoisia selityksiä onnettomuuksien lisääntymiselle noususuhdanteessa, minkä on esitetty johtuvan esim. stressin tai kiireen vaikutuksesta. Tuloksien perusteella työpaikkaonnettomuudet ovat syklisiä, mutta vain tiettyjen ryhmien kohdalla. Työvoiman rakenteen vaihtelu saattaa selittää osan naisten onnettomuuksien syklisyydestä. Miesten kohdalla vain vähemmän vakavat onnettomuudet ovat syklisiä, mikä saattaa johtua strategisesta käyttäytymisestä.

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.

Tiedon jakaminen tiimityössä

Knowledge-sharing in a teamwork The study examines the link between knowledge-sharing that takes place in a team and the dimensions and objectives of the team s activities. The question the study poses is: How does knowledge-sharing in a team relate to the team s activities? The exchange of knowledge is examined using knowledge-sharing networks and the conversion model, which describes the process of knowledge formation. The answer to the question is sought through four empirical articles describing the activities of a team from the viewpoint of quality, fairness, power related to knowledge management, and performance. One of the articles used in the study describes the role of networks in work life more generally. It attempts to shed light on the manner in which team-related networks operate as part of a more extensive structure of organizational networks. Finland is one of the most eager users of teamwork, if numbers are used as a yardstick. About half of all Finnish wage earners worked in teams in 2009, and comparisons show that the use of teams in Finland is above the EU average. This study focuses on so-called semi-autonomous teams, which carry out permanent work tasks. In such teams, tasks are interdependent, and teams are jointly responsible for ensuring that the work is done. Team members may also, at least to some extent, agree between themselves on how the tasks are carried out and are able to take part in the decision-making process. Such teamwork makes knowledge-sharing an important element for the team s activities. Knowledge and knowledge-sharing have become a major resource, allowing organizations to operate and even compete in today s increasingly competitive markets. A single team or a single organization cannot, however, possess all the knowledge required for carrying out the tasks assigned to it. Although it is difficult to copy the knowledge generated in an organization, it is important to share the knowledge within and between organizations. External links supply teams and organizations with important knowledge that allows them to keep their operations up-to-date and their structures well-functioning. In fact, knowledge provides teams and organizations with an intangible resource that improves their capacity to interact with their environment and to adjust to it. For this reason, it is important to examine both the internal and external knowledge-sharing taking place in a team. The findings of the study show that in terms of quality, fairness, performance and the knowledge management issues concerning a team, its social network structure is both internally and externally connected with its activities. A team structure that is internally coherent and at the same time open to external contacts, is, with certain restrictions, connected with the quality, fairness, and performance of the team. The restrictions concern differences between procedural and interactional justice, public and private sectors, and the team leaders and ordinary team members. The role of the team leader is closely connected with the management of networks that are considered valuable. The results of the study indicate that teamwork is supervisor-dominated. Thus, teamwork does not substantially strengthen the influence of individual employees as players in knowledge-transfer networks. However, ordinary team members possess important peer contacts inside the organization. Teamwork clearly allows employees to interact in a democratic manner, and here the transfer of tacit knowledge plays an important role. Keywords: teamwork, knowledge-sharing, social networks, organization

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.

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.

A Cointegration Approach to Topics in Empirical Macroeconomics (summary section only)

Mikael Juselius’ doctoral dissertation covers a range of significant issues in modern macroeconomics by empirically testing a number of important theoretical hypotheses. The first essay presents indirect evidence within the framework of the cointegrated VAR model on the elasticity of substitution between capital and labor by using Finnish manufacturing data. Instead of estimating the elasticity of substitution by using the first order conditions, he develops a new approach that utilizes a CES production function in a model with a 3-stage decision process: investment in the long run, wage bargaining in the medium run and price and employment decisions in the short run. He estimates the elasticity of substitution to be below one. The second essay tests the restrictions implied by the core equations of the New Keynesian Model (NKM) in a vector autoregressive model (VAR) by using both Euro area and U.S. data. Both the new Keynesian Phillips curve and the aggregate demand curve are estimated and tested. The restrictions implied by the core equations of the NKM are rejected on both U.S. and Euro area data. These results are important for further research. The third essay is methodologically similar to essay 2, but it concentrates on Finnish macro data by adopting a theoretical framework of an open economy. Juselius’ results suggests that the open economy NKM framework is too stylized to provide an adequate explanation for Finnish inflation. The final essay provides a macroeconometric model of Finnish inflation and associated explanatory variables and it estimates the relative importance of different inflation theories. His main finding is that Finnish inflation is primarily determined by excess demand in the product market and by changes in the long-term interest rate. This study is part of the research agenda carried out by the Research Unit of Economic Structure and Growth (RUESG). The aim of RUESG it to conduct theoretical and empirical research with respect to important issues in industrial economics, real option theory, game theory, organization theory, theory of financial systems as well as to study problems in labor markets, macroeconomics, natural resources, taxation and time series econometrics. RUESG was established at the beginning of 1995 and is one of the National Centers of Excellence in research selected by the Academy of Finland. It is financed jointly by the Academy of Finland, the University of Helsinki, the Yrjö Jahnsson Foundation, Bank of Finland and the Nokia Group. This support is gratefully acknowledged.

The Effect of Obesity on Wages and Employment: The Difference Between Having a High BMI and Being Fat

In this paper, we re-examine the relationship between overweight and labour market success, using indicators of individual body composition along with BMI (Body Mass Index). We use the dataset from Finland in which weight, height, fat mass and waist circumference are not self-reported, but obtained as part of the overall health examination. We find that waist circumference, but not weight or fat mass, has a negative effect on wages for women, whereas all measures of obesity have negative effects on women’s employment probabilities. For men, the only obesity measure that is significant for men’s employment probabilities is fat mass. One interpretation of our findings is that the negative wage effects of overweight on wages run through the discrimination channel, but that the negative effects of overweight on employment have more to do with ill health. All in all, measures of body composition provide a more refined picture about the effects of obesity on wages and employment.

Applications of Treatment Effects Models and Semiparametric Estimation

This thesis is composed of an introductory chapter and four applications each of them constituting an own chapter. The common element underlying each of the chapters is the econometric methodology. The applications rely mostly on the leading econometric techniques related to estimation of causal effects. The first chapter introduces the econometric techniques that are employed in the remaining chapters. Chapter 2 studies the effects of shocking news on student performance. It exploits the fact that the school shooting in Kauhajoki in 2008 coincided with the matriculation examination period of that fall. It shows that the performance of men declined due to the news of the school shooting. For women the similar pattern remains unobserved. Chapter 3 studies the effects of minimum wage on employment by employing the original Card and Krueger (1994; CK) and Neumark and Wascher (2000; NW) data together with the changes-in-changes (CIC) estimator. As the main result it shows that the employment effect of an increase in the minimum wage is positive for small fast-food restaurants and negative for big fast-food restaurants. Therefore, it shows that the controversial positive employment effect reported by CK is overturned for big fast-food restaurants and that the NW data are shown, in contrast to their original results, to provide support for the positive employment effect. Chapter 4 employs the state-specific U.S. data (collected by Cohen and Einav [2003; CE]) on traffic fatalities to re-evaluate the effects of seat belt laws on the traffic fatalities by using the CIC estimator. It confirms the CE results that on the average an implementation of a mandatory seat belt law results in an increase in the seat belt usage rate and a decrease in the total fatality rate. In contrast to CE, it also finds evidence on compensating-behavior theory, which is observed especially in the states by the border of the U.S. Chapter 5 studies the life cycle consumption in Finland, with the special interest laid on the baby boomers and the older households. It shows that the baby boomers smooth their consumption over the life cycle more than other generations. It also shows that the old households smoothed their life cycle consumption more as a result of the recession in the 1990s, compared to young households.

Nuorten palkansaajien työorientaatiot Suomessa

Tiivistelmä English summary: Work orientations of young wage earners in Finland : a study of individual background factors increasing work centrality of 18-29-year-old Finnish wage earners

Hyvinvointivaltion läpimurto : Pienviljelyhegemonian rapautumisen, kansalaisliikehdinnän ja poliittisen murroksen keskinäiset suhteet suomalaisessa yhteiskunnassa 1950-luvun loppuvuosina

A Breakthrough of Welfare State. The inter-relationships of the civic movement, political transformation, and eroding of a hegemony based on small scale farming in the Finnish society in the late 1950's. The unusually rapid and powerful structural change; the non-parliamentary civic movements of 1956 - 1963; and the left majority in the Finnish parliament between 1958 - 1962 all took place as the Finnish welfare state started to develop. The aim of my research is to analyse the inter-relationships of these processes. The research describes the way the former semi self-sufficient, semi-proletarian and labour-intensive form of production - a simple and discriminatory system in itself - made it possible for the majority of the population to survive through hard work. For some it even provided a possibility to prosper. The waning vitality of semi self-sufficiency and small scale agriculture triggered a political ferment and started a period of searching for something new. The process was so intense that it broke up most of the parties and tore down the old consensus that was based on the power of economic and political elite. The most crucial battle of the great transformation was waged over the nature of the state: Should we build a welfare state and construct social security systems, or should we revert to the old night watchman state and, for example, cancel the modest forms of redistribution of income carried out in the 1950's? The people joining the civic movements were either cottagers of the impoverishing countryside or, quite often, people who had come from the countryside and thus had grown up under conditions of some form of solidarity that included taking care of one's own family. The Finnish social insurance developed in the midst of a change in the structure of production of the society, and it became a compromise to satisfy the needs of both the waning society of small scale agriculture and the rising proletarian society based on wage labour. The hodgepodge of political schemes and use of power became a battle between different notions of the economy and the state; the distribution of national income; and the position of Finland in the international context. This battle created a shape of an interregnum - a period of transformation including two notions of society, two alternative paths for the future and the logic of a correctional move. The transformation of Finland from a poor developing country into a prosperous society has been praised as a success story. In 1956 - 1959, when the old form of governance based on the interests of small scale agriculture and wood processing industry was in decay, and when the future seemed uncertain, the projects to reduce social benefits and efforts to distribute national income even more unequally than before led to a powerful counter-movement by citizens and started an hegemonic change and a equal socia development.