Vol. 26, No. 2

Miikka Rokkanen and Roope Uusitalo:
Changes in Job Stability – Evidence from Lifetime Job Histories (pp. 36–55)


We use individual-level panel data spanning over 42 years from the pension records to evaluate changes in job stability in Finland between 1963 and 2004. Compared with previous research on job stability we cover much longer period and for some cohorts observe the entire lifetime job histories. These data allow us to study job stability using standard duration models instead of simply examining changes in elapsed tenure. We find that hazard of job loss increased during the recession years in the early 1990s but has then returned to the level that prevailed in the 1970s. We also demonstrate that fluctuations in the hazard rate together with changes in labor market entry rates have complicated dynamic effects on the tenure distribution, and that analysing changes in job stability based on the elapsed duration of ongoing jobs may be quite misleading.

(JEL: J63)

Mauri Kotamäki:
The Pension Scheme Need Not Be Pay-As-You-Go: An Overlapping Generations Approach (pp. 56–71)


A relevant question in pension scheme research is: Should a country gradually unload its pension funds in order to, for example, counter some of the negative effects of the aging population and thus to prevent pension contribution rate from rising too much? As both Diamond (1965) and Samuelson (1975) have emphasized, ignoring transitional welfare effects is not a good idea and can potentially lead to wrong policy conclusions. Still many choose to concentrate solely on steady state effects. In this paper I illustrate the transitional and steady state effects of moving from a mixed pension scheme to a pay-as-you-go scheme and I show that, given a set of simplifying assumptions, this may not be a wise policy. On the contrary, a country should gradually switch over to a fully funded scheme.

(JEL: C68, H54, H55)

Erkki Koskela, Rune Stenbacka and Mikael Juselius:
Equilibrium Unemployment with Capital Investments under Labour Market Imperfections (pp. 72–94)


We study the effects of labour market imperfections and the capital stock on equilibrium unemployment. With an exogenous capital-labour ratio, stronger labour market imperfections promote equilibrium unemployment. However, the relationship between the long-run unemployment and the capital stock is not monotonic. With sufficiently strong (weak) labour market imperfections capital investment has a wage-moderating (wage-increasing) effect, thereby decreasing (increasing) equilibrium unemployment. Empirically we find dispersed long-run effects of capital on unemployment, using 28 years of quarterly data, in 16 OECD countries. A significant part of this dispersion can be explained by differences in labour market conditions among the countries.

(JEL: E22, E24, J51, L11)

Finnish Economic Papers 2/2013