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Unintended convergence – how Finnish unemployment reached the European level

  • Koskela , Erkki

    ()

    (University of Helsinki (RUESG) and CESifo)

  • Uusitalo , Roope

    (Labour Institute for Economic Research and Uppsala University)

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.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0406.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 6/2004.

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Length: 35 pages
Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:hhs:bofrdp:2004_006
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/

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  1. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
  2. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July.
  3. Blanchard, O.J. & Diamond, P., 1990. "Ranking, Unemployment Duration, And Wages," Working papers 546, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Stephen Machin & Alan Manning, 1998. "The Causes and Consequences of Long-Term Unemployment in Europe," CEP Discussion Papers dp0400, Centre for Economic Performance, LSE.
  5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, March.
  6. Stephen Nickell, 1999. "Finnish unemployment : a view from outside," Finnish Economic Papers, Finnish Economic Association, vol. 12(2), pages 62-81, Autumn.
  7. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  8. Tuulia Hakola & Roope Uusitalo, 2001. "Let's Make a Deal - the Impact of Social Security Provisions and Firm Liabilities on Early Retirement," Discussion Papers 260, Government Institute for Economic Research Finland (VATT).
  9. Carling, Kenneth & Edin, Per-Anders & Harkman, Anders & Holmlund, Bertil, 1996. "Unemployment duration, unemployment benefits, and labor market programs in Sweden," Journal of Public Economics, Elsevier, vol. 59(3), pages 313-334, March.
  10. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo Group Munich.
  11. Lars Calmfors, 2001. "Wages and Wage-Bargaining Institutions in the Emu : A Survey of the Issues," CESifo Working Paper Series 520, CESifo Group Munich.
  12. Reija Lilja, 1993. "Unemployment benefit system and unemployment duration in Finland," Finnish Economic Papers, Finnish Economic Association, vol. 6(1), pages 25-37, Spring.
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