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Not only Nokia: what Finland tells us about new economy growth


  • Francesco Daveri
  • Olmo Silva


type="main" xml:lang="en"> Is there a relation between information technologies and the growth rate of productivity? Is this relation mainly due to the efficiency-enhancing effects of few leading industries or rather to the pervasive spreading of IT throughout the economy? Our country study on Finland in the 1990s is a contribution to shed light on these issues. We find that Nokia, the world leader in cellular phone production, directly and substantially contributed to enhance productivity growth in Finland. Productivity growth gains outside Nokia and few other IT-related service industries have been small, temporary, or non-existent at all, though. We also provide two pieces of evidence against the existence of technological spillovers between Nokia and the other fast-growing industries in the Finnish economy. As shown by the Finnish input-output table, the thinness of the inter-industry linkages between the Nokia industry and the rest of the economy indicates that productivity gains of the size recorded in the few other fast-growing service industries can be associated to Nokia's productivity boom only to a very small extent. Parallel statistical analysis also shows a striking association between the timing and the industry distribution of productivity gains and the declining pace of the price of machinery and equipment investment goods in those industries. This is evidence that TFP growth increases in those industries should be mostly attributed to the decline in the world price of computing power. Altogether, we interpret our findings as showing that, even in a country endowed with a world-class national champion and a policy environment commonly thought of as conducive to growth, a ‘new economy’ takes a long time to show up. Unlike commonly held tenets, IT diffusion has shown a limited potential in speeding up this process in Finland.

Suggested Citation

  • Francesco Daveri & Olmo Silva, 2004. "Not only Nokia: what Finland tells us about new economy growth," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 117-163, April.
  • Handle: RePEc:bla:ecpoli:v:19:y:2004:i:38:p:117-163

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    Cited by:

    1. Francesco Venturini, 2009. "The long-run impact of ICT," Empirical Economics, Springer, vol. 37(3), pages 497-515, December.
    2. Daniel Lind, 2008. "ICT Production and Productivity in Sweden and Finland, 1975-2004," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 40-51, Fall.
    3. Berghäll, Elina, 2006. "Technical Change, Efficiency, Firm Size and Age in an RD Intensive Sector," Discussion Papers 390, VATT Institute for Economic Research.
    4. Maliranta, Mika & Määttänen, Niku & Pajarinen, Mika, 2016. "Firm Subsidies, Wages and Labor Mobility," ETLA Reports 60, The Research Institute of the Finnish Economy.
    5. Davide Consoli & Francesco Vona & Toni Saarivirta, 2013. "Analysis of the Graduate Labour Market in Finland: Spatial Agglomeration and Skill--Job Match," Regional Studies, Taylor & Francis Journals, vol. 47(10), pages 1634-1652, November.
    6. Nikulainen, Tuomo & Pajarinen, Mika, 2013. "Industry restructuring in the ICT sector – What does labor mobility tell us about skill relatedness and knowledge spillovers?," ETLA Working Papers 17, The Research Institute of the Finnish Economy.
    7. Berghäll, Elina, 2008. "Revealing Agglomeration Economies with Stochastic Frontier Modelling in the Finnish ICT Industry," Discussion Papers 435, VATT Institute for Economic Research.
    8. Berghäll, Elina, 2006. "Technical Efficiency in an RD Intensive Industry: Finnish ICT Manufacturing," Discussion Papers 389, VATT Institute for Economic Research.
    9. Schilirò, Daniele, 2005. "Economia della conoscenza,istituzioni e sviluppo economico
      [Knowledge-based economy, institutions and economic development]
      ," MPRA Paper 31492, University Library of Munich, Germany.
    10. Shahid Yusuf & Kaoru Nabeshima, 2012. "Some Small Countries Do It Better : Rapid Growth and Its Causes in Singapore, Finland, and Ireland," World Bank Publications, The World Bank, number 2243, July.
    11. International Monetary Fund, 2005. "Finland; Selected Issues," IMF Staff Country Reports 05/36, International Monetary Fund.
    12. van Beers, Cees & Berghäll, Elina & Poot, Tom, 2008. "R&D internationalization, R&D collaboration and public knowledge institutions in small economies: Evidence from Finland and the Netherlands," Research Policy, Elsevier, vol. 37(2), pages 294-308, March.
    13. Rafael Fernández Sánchez, 2005. "Irlanda y Finlandia: Dos Modelos de Especialización en Tecnologías Avanzadas," Policy Papers del Instituto Complutense de Estudios Internacionales 05-03, Universidad Complutense de Madrid, Instituto Complutense de Estudios Internacionales.
    14. Berghäll, Elina, 2006. "RD and Productivity Growth in Finnish ICT Manufacturing," Discussion Papers 388, VATT Institute for Economic Research.
    15. Daniel Lind, 2005. "Manufacturing Productivity in Sweden: an International Perspective Since 1960," International Productivity Monitor, Centre for the Study of Living Standards, vol. 11, pages 47-56, Fall.
    16. Kiander, Jaakko, 2004. "The Evolution of the Finnish Model in the 1990s: from Depression to High-tech Boom," Discussion Papers 344, VATT Institute for Economic Research.
    17. Saarivirta, Toni & Consoli, Davide, 2007. "Where Did They Go? A Study on Newly Established Universities and Graduate Mobility in Finland," MPRA Paper 11377, University Library of Munich, Germany.
    18. Berghäll, Elina & vanBeers, Cees & Poot, Tom, 2004. "Foreign Direct Investment and Science and Technology Infrastructure in Small Countries: Evidence from Finland and the Netherlands," Discussion Papers 357, VATT Institute for Economic Research.
    19. Maliranta, Mika & Nikulainen, Tuomo, 2008. "Labour Force Paths as Industry Linkages: A Perspective on Clusters and Industry Life Cycles," Discussion Papers 1168, The Research Institute of the Finnish Economy.
    20. Emanuele Forlani, 2010. "Competition in the Service Sector and the Performances of Manufacturing Firms: Does Liberalization Matter?," CESifo Working Paper Series 2942, CESifo Group Munich.
    21. Md Shahiduzzaman & Allan Layton & Khorshed Alam, 2015. "On the contribution of information and communication technology to productivity growth in Australia," Economic Change and Restructuring, Springer, vol. 48(3), pages 281-304, November.

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