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The Nordic experience revisited: labour market booms and slumps since the 1990s in Finland and Sweden

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Author Info

  • Jaakko Pehkonen
  • Hector Sala
  • Pablo F. Salvador

Abstract

Purpose – This paper aims to provide an account of the unemployment performance of two Nordic countries during their recent labour market booms and slumps. Design/methodology/approach – Based on the empirical models of Karanassou et al., we conduct dynamic simulation exercises and explore the determinants of unemployment. Findings – The analysis yields two main findings. First, the capital stock was the most important determinant of the unemployment trajectory in both countries. This result appears in all periods considered: in the slump of the early 1990s and the boom of the late 1990s, as well as in the stabilisation period of the early 2000s. Second, the role of the foreign sector on the unemployment trajectory was significant in Finland, its quantitative impact being one-third of the effect for the capital stock in the first and third periods, and half of the latter in the second period. Originality/value – The results illustrate the importance of non-standard labour market variables in examining unemployment trajectories. The findings call for a wider than usual perspective in trying to solve the unemployment problem.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 38 (2011)
Issue (Month): 1 (January)
Pages: 52-65

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Handle: RePEc:eme:jespps:v:38:y:2011:i:1:p:52-65

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Related research

Keywords: Capital; Finland; Labour market; Sweden; Unemployment;

References

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  1. Roy Cromb, 1993. "A Survey of Recent Econometric Work on the NAIRU," Journal of Economic Studies, Emerald Group Publishing, vol. 20(1/2), pages 27-51, January.
  2. Karanassou, Marika & Sala, Hector & Salvador, Pablo F., 2007. "Capital Accumulation and Unemployment: New Insights on the Nordic Experience," IZA Discussion Papers 3066, Institute for the Study of Labor (IZA).
  3. Marika Karanassou & Hector Sala, 2008. "Labour Market Dynamics in Australia: What Drives Unemployment?," Discussion Papers 2008-26, School of Economics, The University of New South Wales.
  4. Marika Karanassou & Hector Sala, 2008. "The Rise and Fall of Spanish Unemployment: A Chain Reaction Theory Perspective," Working Papers 633, Queen Mary, University of London, School of Economics and Finance.
  5. Rod Cross, 1993. "The NAIRU as a Theory of Equilibrium Unemployment," Journal of Economic Studies, Emerald Group Publishing, vol. 20(1/2), pages 116-122, January.
  6. Nymoen, Ragnar & Rodseth, Asbjorn, 2003. "Explaining unemployment: some lessons from Nordic wage formation," Labour Economics, Elsevier, vol. 10(1), pages 1-29, February.
  7. Holden, Steinar & Nymoen, Ragnar, 2002. " Measuring Structural Unemployment: NAWRU Estimates in the Nordic Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(1), pages 87-104.
  8. Engelbert Stockhammer, 2004. "Explaining European Unemployment: Testing the NAIRU Hypothesis and a Keynesian Approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 18(1), pages 1-26.
  9. Xavier Raurich & Hector Sala & Valeri Sorolla, 2009. "Labour market effects of public capital stock: evidence for the Spanish private sector," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(1), pages 1-18.
  10. Seppo Honkapohja & Erkki A. Koskela & Willi Leibfritz & Roope Uusitalo, 2009. "Economic Prosperity Recaptured: The Finnish Path from Crisis to Rapid Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012693, January.
  11. Philip Arestis & Michelle Baddeley & Malcolm Sawyer, 2007. "The Relationship Between Capital Stock, Unemployment And Wages In Nine Emu Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 59(2), pages 125-148, 04.
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