Effects of subsidizing the first employee – Empirical evidence from Finland

Small businesses form a significant share of all businesses and employ a large share of all employees. Therefore, governments are often interested in subsidizing them and especially employment in smaller firms. Nonemployer firms have received special interest, especially in Finland, due to their large share of all businesses. It has been argued that the government should encourage them to hire by subsidizing employment. However, there is no evidence on the effectiveness of such policies. In general, there is surprisingly little evidence on how small firms react to employment subsidies or of employment subsidies targeted according to firm characteristics. The subject of this thesis is the effects of subsidizing the first employee. While theoretical background suggests the subsidy might have efficiency gains, because there might be market inefficiencies that lead to too little employment in small firms. The focus of this research, however, is on the empirical evidence. There was a regional subsidy for hiring the first employee in Finland between 2007 and 2011. Nonemployer firms in the subsidy area were eligible for a wage subsidy for two years when they hired the first employee. The design of the subsidy enables studying the effects in a natural experiment framework that are nowadays popular in public economics. It can be shown that the area without the subsidy provides a good counterfactual to the area where the subsidy was available. Therefore, the effects of the subsidy can be estimated with difference-in-differences method. This method compares the change in the subsidy area to the change in the area without the subsidy. The data used is firm level data spanning from 2000 to 2013. The data is provided by the Finnish Tax Administration including tax declarations by all Finland based companies. The effects for hiring decisions are estimated by examining the effects for alternative variables such as employment, wage expenditure and turnover. According to the results, the subsidy did not have statistically significant effect on any of the variables of interest. Therefore, it can be concluded that the subsidy did not increase hires in nonemployer firms. This implies that the labour demand elasticity of nonemployer firms is very small. The results are in line with previous literature on the effectiveness of general employment subsidies in Scandinavia that suggest that labour demand elasticity is rather small resulting in small or no effects of employment subsidies. However, my research provides new evidence on labour demand of nonemployer firms especially that has not been studied before. The results are in line with the observation that most nonemployer firms are self-employed persons who are not interested in growing their business to employ others as well, but only provide for themselves. Because of this employment subsidies to the self-employed are not particularly well targeted. The theoretical grounds for the subsidy actually hold for other small firms as well, so it can be argued the subsidy would be more effective if it was extended for hiring the first few employees.

Tutors as mediators of exchange student experiences: evaluation of the international student tutor system at the University of Turku

As academic student mobility is increasing, improving the functionality of international operations is recognised as a competitive advantage at tertiary education institutions. Although many scholars have researched the experiences of exchange students, the role of student tutors and their contribution to exchange students’ experiences is still an unknown factor. This research examines international tutoring at the University of Turku, and aims to understand better the way tutoring contributes to exchange experiences and to explore the functionality of the tutor system and discover areas for improvements. To achieve these goals, the research seeks to answer the fundamental research question: What is the role of tutors in mediating exchange experiences? The theoretical framework combines literature on mediating exchange experiences, the phenomenon of studying abroad, the process of adaptation, the importance of cross-cultural communication, and the role of student tutors as mediators. Based on the literature review, a theoretical model for studying the mediation of exchange experiences is introduced. The model’s applicability and validity is examined through a case study. Three methods were used in the empirical research: surveys, participant observations, and interviews. These methods provided extensive data from three major parties of the tutor system: tutors, exchange students, and the international office. The findings of the research reveal that tutoring – instrumental leading and social and cultural mediating – generates both negative and positive experiences depending on the individuals’ expectations, motivations, relationships, and the nature of the tutoring. Although functional, there are a few weaknesses in the tutor system. Tutors tend to act as effective instrumental leaders, but often fail to create a friendship and contribute to the exchange students’ experience through social and cultural mediation, which is significantly more important in the exchange students’ overall experience in terms of building networks, adapting, gaining emotional experiences, and achieving the stage of personal development and mental change. Based on the weaknesses, three improvements are suggested: (1) increasing comprehensive sharing of information, effective communication, and collective cooperation, (2) emphasising the importance of social and cultural mediation and increasing the frequency of interaction between tutors and exchange students, and (3) improving the recruitment and training, revising the process of reporting and rewarding, and finally, enhancing services and coordination.