Vol. 22, No. 2

Jean-Charles Rochet:
Regulating Systemic Institutions (pp. 35–46)


The subprime crisis has revealed many loopholes in the supervisory/regulatory framework for banks. The most dramatic of these loopholes is certainly the Too Big To Fail (TBTF) problem: As a consequence of the way central banks and Treasuries have managed the crisis, any large financial institution that encounters financial problems in the future can expect to be bailed out by public authorities on the ground that its resolution could provoke a systemic crisis. This article proposes a solution to the TBTF problem, based on an Industrial Organization approach. Instead of simply downsizing large financial institutions or imposing stricter regulations based on newly developed measures of systemic risk exposures, I propose to reform in depth the organization of interbank and money markets.

(JEL: G21, L51)

Samu Kurri:
Price Changes in Finland: Some Evidence from the Micro CPI Data (pp. 47–62)


This paper studies the adjustment patterns of Finnish Consumer Price Index (CPI) from the following perspectives. First, we examine how the adjustment patterns have changed from late 1990s to mid 2000s. We find significant differences in the price adjustment patterns both over time and between item subgroups. Second, we examine the relative importance of time and state dependent pricing elements found in the Finnish CPI data. Our empirical findings are consistent with a time dependent pricing model, although we find some signs of state dependent pricing behaviour as well.

(JEL: C40, C81, D21, D39, E31, E37, R32)

Kazuhiro Ohnishi:
Strategic Commitment and Three-Stage Games with Labour-Managed and Profit-Maximizing Firms (pp. 63–74)


This paper examines two three-stage games with a labor-managed income-perworker-maximizing firm and a profit-maximizing firm. In the first stage, the labor-managed firm (resp. the profit-maximizing firm) decides whether to make a commitment to capacity. In the second stage, the other firm decides on a commitment to capacity. In the third stage, both firms non-cooperatively choose quantities. The paper shows the equilibrium outcomes of the two three-stage games. The paper then finds that the introduction of capacity commitment into the analysis of threestage mixed market games is profitable for the labor-managed firm while it is not profitable for the profit-maximizing firm.

(JEL: C72, D21, L20)

Niclas Berggren, Henrik Jordahl and Charlotta Stern:
The Political Opinions of Swedish Social Scientists, Online supplement (pp. 75–88)


We study the political opinions of Swedish social scientists in seven disciplines and find indications of a left‑right divide, with sociology and gender studies being the most left‑leaning disciplines, with business administration, economics, and law being the most right‑leaning ones, and with political science and economic history being located somewhere in between. This pattern is found when looking at party preferences, left‑right self‑identification, and positions on economic policy issues. Overall, there is a slight dominance in sympathies for the right, although there are more academics to the left among those most involved in activities with a potential to influence decision‑makers.
(JEL: A11; A13; A14)

S. Subramanian:
Revisiting the Normalization Axiom in Poverty Measurement (pp. 89–98)


The ‘normalization’ axiom associated with Sen’s poverty index – and this, indeed, holds for most extant measures of poverty – entails an uncomfortable implication when we adopt a strong, or inclusive, definition of the poor. This paper suggests that we may not always be at liberty to adopt a weak definition. The available alternative then is to change the form of the poverty measure. Accordingly, a modification of his normalization axiom which leads to a variant of Sen’s index, together with a variant also of the Foster-Greer-Thorbecke poverty measures, is advanced and discussed. The derivation of the new normalization axiom benefits from Basu’s decomposition of the Sen axiom.

Finnish Economic Papers 2/2009