Vol. 14, No. 1

Paolo M. Panteghini:
Dual income taxation: the choice of the imputed rate of return (pp. 5–13)


In this article we study a crucial aspect of a Dual Tax System: the choice of the imputed rate of return. Under interest rate uncertainty, its optimal value will be shown to depend on the nature of investment. Following Fane (1987), if investment is reversible, the imputation rate ensuring neutrality is proportional to the interest rate on default-free bonds. If, instead, investment is irreversible, the imputation rate must be higher, in order to compensate for the discouraging effects of irreversibility.

(JEL: H25)

Jussi Tolvi:
Outliers in eleven Finnish macroeconomic time series (pp. 14–32)


Outliers are detected from eleven monthly Finnish macroeconomic time series (from 1922 to 1996), and underlying reasons for the detected outliers suggested. Outliers are found in all of the series. The detected outliers seem to cluster together, both within and across series. Some of the detected outliers are also highly influential with respect to some nonlinearity tests, and the results can change in either direction (from significant nonlinearity to non-significant, or vice versa) after the outliers are taken into account. Mostly, however, the evidence for nonlinearity is reduced after the outliers are taken into account.

(JEL: C5, E3)

Tuomas Takalo:
On the optimal patent policy (pp. 33–40)


Numerous attempts have been made to identify the optimal mix of patent breadth and patent life. Unfortunately, the range of contradictory results reported in literature is rather impressive. The aim of this note is to develop a very stylised model that encompasses a variety of different findings, and to derive a general rule for the optimal patent policy.

(JEL: O34, O31)

Aki Kangasharju and Jaakko Pehkonen:
Employment-output link in Finland: evidence from regional data (pp. 41–50)


This study examines the relation between employment and output using panel data on 452 Finnish municipalities regrouped into 85 areas, representing regions at the so called NUTS4 level in the EU. The results imply that: (i) the contemporaneous relation between changes in employment and output growth disappeared in the early 1990s; (ii) there is evidence of a recovery of this relation in the mid 1990s; (iii) there are differences in the employment-output relation between different regions; and (iv) the existing differences can be partly explained by differences in industrial specialisation.

(JEL: E24, R11)

Tuomas Pekkarinen:
The wage curve: evidence from the Finnish metal industry panel data (pp. 51–60)


In this paper we study the wage curve with Finnish metal industry panel data from the period 1991–95. As an unemployment variable we use the unemployment rate of the regional county. The unemployment rate is split into short- and long-term unemployment. The effect of active labour market policies is controlled for by augmenting the wage equation with a variable for subsidised employment schemes. The estimated unemployment elasticity of wages in the Finnish metal industry is somewhat smaller than the elasticities reported by other studies. Long-term unemployment increases wages and subsidised employment schemes decrease them. Their combined effect is zero. The regional fixed effects estimate of the slope of the wage curve is –0.04. The dependent variable is the logarithm of the fixed hourly wage and the unemployment variable is corrected so that the long-term unemployed are removed from the pool of unemployed and the labour force and the workers in subsidised employment schemes are considered as unemployed. Estimations with regional means indicate that common group errors bias the estimates of standard errors significantly.

(JEL: O1, O2)

Finnish Economic Papers 1/2001