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Regional Economic Repercussions of an Economic Crisis: A Sectoral Analysis


  • Kangasharju, Aki
  • Pekkala, Sari


This paper investigates the evolution of regional disparities in Finland between 1988 and 1997. The analysis focuses on per capita GDP and its subcomponents, particularly labour productivity, jobs and population. The results show, first, that the evolution of labour productivity and the number of jobs account for the emerged regional divergence of per capita GDP during 1990-1995. Second, even though inter-regional migration tends to have convergent effects on regional per capita GDP, its effect was not strong enough during 1990-1995: the divergence of productivity and jobs dominated. Third, among divergent factors (productivity and jobs), manufacturing contributes the most to the divergence of per capita GDP, whereas private services is the main convergent sector. One conclusion of the paper is that the divergent forces are gaining strength at the expense of convergent ones, as migration directs population into largest regional centres. A decline in convergent factors may occur as migration decreases the need for private sector jobs outside the centres.

Suggested Citation

  • Kangasharju, Aki & Pekkala, Sari, 2001. "Regional Economic Repercussions of an Economic Crisis: A Sectoral Analysis," Discussion Papers 248, VATT Institute for Economic Research.
  • Handle: RePEc:fer:dpaper:248

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    References listed on IDEAS

    1. Jörg Decressin, 1994. "Internal migration in West Germany and implications for East-West salary convergence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(2), pages 231-257, June.
    2. Kollmann, Robert, 1995. "The correlation of productivity growth across regions and industries in the United States," Economics Letters, Elsevier, vol. 47(3-4), pages 437-443, March.
    3. Aki Kangasharju, 1998. "beta convergence in Finland: regional differences in speed of convergence," Applied Economics, Taylor & Francis Journals, vol. 30(5), pages 679-687.
    4. Sari Pekkala, 1999. "Regional convergence across the Finnish provinces and subregions, 1960-94," Finnish Economic Papers, Finnish Economic Association, vol. 12(1), pages 28-40, Spring.
    5. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
    6. Saint-Paul, Gilles, 1997. "Business Cycles and Long-Run Growth," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 145-153, Autumn.
    7. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    8. Kangasharju, Aki & Nijkamp, Peter, 2001. "Innovation dynamics in space: local actors and local factors," Socio-Economic Planning Sciences, Elsevier, vol. 35(1), pages 31-56, March.
    9. J. H. L. Dewhurst, 1998. "Convergence and divergence in regional household incomes per head in the United Kingdom, 1984-93," Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 31-35.
    10. Aki Kangasharju, 1999. "Relative Economic Performance in Finland: Regional Convergence, 1934-1993," Regional Studies, Taylor & Francis Journals, vol. 33(3), pages 207-217.
    11. Evans, Philip & McCormick, Barry, 1994. "The New Pattern of Regional Unemployment: Causes and Policy Significance," Economic Journal, Royal Economic Society, vol. 104(424), pages 633-647, May.
    12. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
    13. Philippe Aghion & Gilles Saint-Paul, 1998. "Uncovering Some Causal Relationships Between Productivity Growth and the Structure of Economic Fluctuations: A Tentative Survey," LABOUR, CEIS, vol. 12(2), pages 279-303, July.
    14. Sari Pekkala, 2000. "Aggregate economic fluctuations and regional convergence: the Finnish case 1988-95," Applied Economics, Taylor & Francis Journals, vol. 32(2), pages 211-219.
    15. Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 819-863.
    16. Kangasharju, Aki & Pekkala, Sari, 2000. "The Effect Of Aggregate Fluctuations On Regional Economic Disparities In Finland," ERSA conference papers ersa00p26, European Regional Science Association.
    17. repec:hrv:faseco:30752799 is not listed on IDEAS
    18. Maria Demertzis & Andrew Hughes Hallett, 1996. "Regional Inequalities and the Business Cycle: An Explanation of the Rise in European Unemployment," Regional Studies, Taylor & Francis Journals, vol. 30(1), pages 15-29.
    19. Hess, Gregory D & Shin, Kwanho, 1997. "International and Intranational Business Cycles," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 93-109, Autumn.
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    Cited by:

    1. Böckerman, Petri, 2002. "Understanding Regional Productivity in a Nordic Welfare State: Does ICT Matter?," Discussion Papers 798, The Research Institute of the Finnish Economy.
    2. Bockerman, Petri & Maliranta, Mika, 2007. "The micro-level dynamics of regional productivity growth: The source of divergence in Finland," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 165-182, March.


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