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Unintended convergence: how Finnish unemployment reached the European level

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  • Koskela, Erkki
  • Uusitalo, Roope

Abstract

Finnish unemployment rose in the early 1990s from 3% to 18% in just four years.It has since fallen back to the average European level, being 9.0% in January 2003.In this paper, we describe the shocks leading to this unforeseen increase in unemployment.We then discuss and research the role of labour market institutions in the adjustment process that has brought unemployment back to a " normal " level.We argue that these institutions cannot be blamed for the increase in unemployment, but that more flexible institutions could have led to a more rapid fall in unemployment once the Finnish economy began to recover.

Suggested Citation

  • Koskela, Erkki & Uusitalo, Roope, 2004. "Unintended convergence: how Finnish unemployment reached the European level," Bank of Finland Research Discussion Papers 6/2004, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2004_006
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    Cited by:

    1. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.
    2. Kyyrä, Tomi, 2010. "Partial unemployment insurance benefits and the transition rate to regular work," European Economic Review, Elsevier, vol. 54(7), pages 911-930, October.
    3. Böckerman, Petri & Hämäläinen, Ulla & Uusitalo, Roope, 2009. "Labour market effects of the polytechnic education reform: The Finnish experience," Economics of Education Review, Elsevier, vol. 28(6), pages 672-681, December.
    4. Petri Böckerman & Pekka Ilmakunnas, 2009. "Unemployment and self‐assessed health: evidence from panel data," Health Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 161-179, February.
    5. Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2009. "Micro-level Rigidity vs. Macro-level Flexibility: Lessons from Finland," Working Papers 0972, Tampere University, Faculty of Management and Business, Economics.
    6. Tomi Kyyrä & Ralf A. Wilke, 2007. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 154-182, March.
    7. International Monetary Fund, 2005. "Finland: Selected Issues," IMF Staff Country Reports 2005/036, International Monetary Fund.
    8. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo.
    9. repec:zbw:bofrdp:2004_022 is not listed on IDEAS
    10. Seppo Honkapohja & Frank Westermann, 2009. "Pay-setting Systems in Europe: Ongoing Developments and Possible Reforms," Palgrave Macmillan Books, in: Seppo Honkapohja & Frank Westermann (ed.), Designing the European Model, chapter 3, pages 82-121, Palgrave Macmillan.
    11. Burak GÜRIŞ & İpek M. YURTTAGÜLER & Muhammed TIRAŞOĞLU, 2017. "Unemployment convergence analysis for Nordic countries: Evidence from linear and nonlinear unit root tests," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 45-56, Spring.
    12. Heidi Soininen, 2007. "Finnish Evidence of Changes in Labor Market Matching," Finnish Economic Papers, Finnish Economic Association, vol. 20(1), pages 57-71, Spring.
    13. Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2007. "Who bears the burden of wage cuts? Evidence from Finland during the 1990s," International Journal of Manpower, Emerald Group Publishing Limited, vol. 28(2), pages 100-121, May.
    14. Virve Ollikainen & Tomi Kyyrä, 2006. "To Search or Not to Search? The Effects of UI Benefit Extension for the Elderly Unemployed," Discussion Papers 400, Government Institute for Economic Research Finland (VATT).
    15. Castrén, Olli & Takalo, Tuomas & Wood, Geoffrey, 2004. "Labour market reform and the sustainability of exchange rate pegs," Bank of Finland Research Discussion Papers 22/2004, Bank of Finland.
    16. Tomi Kyyra & Mika Maliranta, 2006. "The Declining Labour Share: Lessons From Finnish Micro-data," EcoMod2006 272100047, EcoMod.
    17. Takalo, Tuomas & Castrén, Olli & Wood, Geoffrey, 2004. "Labour market reform and the sustainability of exchange rate pegs," Working Paper Series 406, European Central Bank.
    18. Böckerman, Petri & Laaksonen, Seppo & Vainiomäki, Jari, 2006. "Micro-level evidence on wage rigidities in Finland," MPRA Paper 1811, University Library of Munich, Germany.
    19. Kyyrä, Tomi & Wilke, Ralf A., 2006. "Reduction in the Long-Term Unemployment of the Elderly: A Success Story from Finland Revised," Discussion Papers 396, VATT Institute for Economic Research.
    20. Kyyrä, Tomi, 2007. "Studies on Wage Differentials and Labour Market Transitions," Research Reports 133, VATT Institute for Economic Research.
    21. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo.
    22. Virve Ollikainen, 2006. "Gender Differences in Transitions from Unemployment: Micro Evidence from Finland," LABOUR, CEIS, vol. 20(1), pages 159-198, March.
    23. repec:zbw:bofrdp:2004_006 is not listed on IDEAS

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