Vol. 14, No. 2

Jesper Lindé:
Fiscal policy and interest rates in a small open economy (pp. 65–83)


This paper contains an empirical investigation of the effects of fiscal policy on interest rates based on a conventional stochastic macro model designed for a small open economy. The empirical investigation utilizes data for Sweden, a country which has experienced very large fluctuations in the government budget deficits and in the short- and long-term nominal interest rates, thus providing a better empirical test than previous studies. According to the empirical results, larger budget deficits induce higher interest rates, as implied by conventional macroeconomic theory.

(JEL: E12, E62, F41)

Petri Böckerman and Mika Maliranta:
Regional disparities in gross job and worker flows in Finland (pp. 84–103)


The aim of this study is to characterize the structure and the evolution of Finnish regional labour markets in terms of gross job and worker flows using establishment-level data. There is no solid evidence that the gross job creation rate is on average lower in Eastern and Northern Finland. The rapid rise in regional unemployment disparities in the 1990s can be explained via the rise in the disparities in the gross job destruction rates across regions during the great slump of the early 1990s. There are also distinct regional differences in the adjustment of labour demand at the establishment level.

(JEL: J23, R23)

Erik Fjaerli and Diderik Lund:
The choice between owner’s wages and dividends under the dual income tax (pp. 104–119)


Tax-motivated shifting of income between different tax bases erodes tax revenues, confuses income statistics, and makes the effects of tax reforms unpredictable. Few studies have been able to use micro data to investigate this phenomenon. Using a rather unique data set, this study shows that the choice of type of payout from corporations to owners is strongly, but not uniquely, motivated by taxes. There are indications that the personal tax system is more clearly perceived by the owners than is the system of corporate taxes and regulations, and that own wage payments are motivated by rights to social security benefits.

(JEL: H25, H26)

Juuso Vataja:
On the interdependence of Finnish and Swedish newsprint prices (pp. 120–130)


This study explores the interdependence of Finnish and Swedish newsprint prices. Since newsprint represents a very homogenous product, the law of one price (LOP) is assumed to hold between the Finnish and the Swedish common currency newsprint prices in the long run. The results support the LOP hypothesis, and the Swedish prices are found to be weakly exogenous, implying that the Finnish prices follow fundamentally the Swedish ones in the long run. Moreover, deviations from the LOP are found to be economically relatively small and short-lived.

(JEL: F36, F41)

Finnish Economic Papers 2/2001