Vol. 15, No. 2

Rune Stenbacka:
Microeconomic Policies in the New Economy (pp. 59–75)


This survey emphasizes innovation-intensive competition, strong technological scale economies, switching costs, network effects and complementarity between system components as characteristic features of the core industries in the information economy. With reference to these features the study explores how to design welfare-improving microeconomic policies, in the form of competition policies, technology policies or combinations of these, in the digital economy. In particular, a number of prevalent business practices typical of the digital economy are evaluated from the point of view of a microeconomic policy perspective.

(JEL: L40, L50, O30)

Jukka Jalava:
Accounting for Growth and Productivity: Finnish Multi-Factor Productivity 1975–99 (pp. 76–86)


This paper presents new calculations for the multi-factor productivity of the nonresidential market production in Finland. The new methodology entails quality corrected measures of capital and labour services. The results reinforce the view of a shift taking place in the Finnish growth pattern after the early 1990s recession, from extensive to intensive growth. The exception is the extensive contribution of information and communication capital. Multi-factor productivity has been the engine of growth during the whole observation period from 1975 to 1999, but it experienced a significant step-up in the 1990s.

(JEL: O3, O4)

Tom Björkroth:
Market Structure and Welfare in the Finnish Market for Long-Distance Telecommunications (pp. 87–101)


This paper attempts to measure the welfare effects associated with the opening of the Finnish market for long-distance voice telephony in 1993. It also focuses on the remaining potential welfare losses associated with imperfect competition in this market. The results suggest that entry benefited consumers substantially in terms of consumer surplus, while the change in operators’ net profits was negative. From 1993 onwards the potential relative welfare loss substantially decreased from about 40 per cent of sales revenues to about 11 per cent. However, the figures  for the late 1990s strongly depend upon assumptions regarding market structure and price elasticity. Nevertheless, the results suggest that the potential relative welfare losses are not negligible.

(JEL: L96, L13, D60)

Michael Funke:
Determining Taxation and Investment Impacts of Estonia’s 2000 Income Tax Reform (pp. 102–109)


This paper analyses the investment effects of the 2000 tax reform in Estonia. More precisely, it studies the impact of the shift from an imputation system to a system in which companies pay taxes only with respect to distributed profits. The paper uses Tobin’s q theory of investment and numerical simulations reach the conclusion of 6.1% increase in the equipment capital stock over the long run.
(JEL: E22, E62, H25, O52)

Paolo M. Panteghini:
On Debt-Financing and Investment (pp. 110–114)


his paper studies the relationship between debt-financing and the timing of investment, under asymmetric information. In particular we show that an option to delay raises the average profitability of firms who choose to invest immediately, thereby reducing the market interest rate on debt. Moreover, the option to delay is shown to be welfare improving.

(JEL: D81, D92, G33)

Finnish Economic Papers 2/2002