Vol. 6, No. 1

Kyösti Pulliainen and Heikki Taimio:
Symposium on mass unemployment in Finland: an introductory note (pp. 3–4)

Richard Jackman:
Mass unemployment: international experience and lessons for policy (pp. 5–12)


While variations across countries in the experience of mass unemployment have been extensively analysed, the even more striking variation over time is much less well understood. This paper argues that the capacity of a nation to maintain full employment by means of ‘Keynesian’ fiscal and monetary policies is constrained no longer so much by the need to contain inflationary pressures (where the wage setting arrangements of corporatist countries are an advantage) as by the growth of international trade and capital mobility. It is argued that traditional corporatist institutions are not well-suited to these developments.

(JEL: E24, E60)

Outi Aarnio:
Temporary active labour market programmes – potential effects on unemployment (pp. 13–24)


This paper assesses the potential effects of temporary active labour market programmes on unemployment and regular employment. The effect of such programmes is analysed in the framework of a (partial) flow equilibrium model, which explicitly takes into account the potential changes in the programme participants’ probability of gaining regular work and/or changes in the average length of future employment contracts of the programme participants (average separation rate). We will also discuss the potential wage setting effects of active labour market policies and indicate how the equilibrium unemployment may be affected.

(JEL: J63, J64, J68)

Reija Lilja:
Unemployment benefit system and unemployment duration in Finland (pp. 25–37)


In this paper a competing risks model for the probability of exiting from the labourforce or becoming employed under three different benefit schemes are estimated using data from the Finnish Labour Force Surveys. According to our results employment probability is three times higher for a non-claimant and about twice as high for an earnings-related unemployment insurance receiver than for a similar person on means-tested unemployment assistance. These figures suggest that the unemployment benefit system does not improve the benefit claimants’ performance compared to that of the non-claimants in Finland.

(JEL: C14, J64)

Jaakko Kiander:
Financial shocks, wage-setting and employment (pp. 41–49)


The paper investigates the employment effects of changes in interest rate, availability of credit, internal net worth, market power and debt-equity ratio. A model of an oligopolistic risk averse firm is used as an analytical framework, combined with a Nash bargain over wage. The analysis suggests that employment is highly sensitive to changes in financial factors, and that this sensitivity increases with indebtedness. The main reasons for the result are the assumptions of (1) the decisive role of investment in employment determination in long run and (2) credit rationing. The result emphasizes the importance of monetary policy when aggregate employment is concerned.

(JEL: E22, E24, J23)

Juha Kettunen:
Increasing incentives for reemployment (pp. 51–60)


This paper studies the incentives of unemployed workers for reemployment using search models and semi-parametric econometric methods of reemployment. The incentives for reemployrnent can be increased by suspending the protective rules regarding labour mobility stipulated in the Finnish Unemployment insurance Act and reducing the benefits after a fixed period of unemployment. The econometric results support such an interpretation. The unemployment benefits have first a negative effect on the probability of becoming employed, but after three months this effect vanishes when the rules of the system become stricter.

(JEL: J64, J65)

Finnish Economic Papers 1/1993