Economic shocks, progressiveness of taxation, and indexation of taxes and public expenditure in EMU

We study the effects of demand, tax and supply shocks in one- and twocountry macroeconomic models with fixed exchange rates, with our main emphasis on the stabilisation properties of progressive taxation. The models try to depict outcomes for the EMU countries. In the one-country model we obtain a priori results. In the case of the two-country model, we calculate the solution by using realistic estimates for the parameters. In the one-country model progressive taxation tends to stabilise output in the cases of demand and tax shocks. In the case of a supply shock, tax progressiveness tends to stabilise output if taxes are fully indexed. If they are not, the outcome depends especially on the size of the demand effect of taxes. Progressive taxation stabilises prices definitely only in the case of a tax shock. In the cases of demand and supply shocks, the outcome depends in opposite ways on the relative strengths of the demand and supply effects of taxes. In the two-country model progressive taxation tends to increase output stability in both countries in the face of a demand shock. Progressiveness stabilises prices if wages and prices react only modestly to changes in taxes, but destabilises them when these reactions are strong. In the case of a tax shock, progressive taxation tends to stabilise the output and prices of both countries. In the case of a supply shock, output and prices are not very sensitive to progressiveness. When tax indexation is low, progressiveness can, however, destabilise the output of the country where the shock originates. All in all, progressive taxation tends to stabilise output or has a neutral effect in most cases. The effects on price stabilisation are, however, more controversial

Why do firms invest in the Baltic Sea Region

We have defined the Baltic Sea Region as consisting of the following countries and regions: Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Sweden, and the regions of St Petersburg, Leningrad Oblast and Kaliningrad in Russia. We have investigated the factors af-fecting FDI in the Baltic Sea Region in three ways. First, we have studied the factors affecting FDI on the basis of the existing theoretical and empirical literature. Secondly, we have studied the characteristics of the existing FDI in the Baltic Sea Region. Thirdly, we have researched the investment motives through two firm questionnaires: 1) firms participating in the MIPIM real estate fairs and 2) Finnish firms active in the Baltic Sea Region (Finpro register). The common results of both empirical enquiries were: 1) the most important reasons for FDI are market size and its growth potential, 2) companies do not see the BSR as a single market in their actual decision making process, 3) there are clear benefits in having the non-Euro area countries as members of the EMU, but the results are not very robust: obviously they are weakened by the already rather credible pegs of the Estonian, Danish, Latvian and Lithuanian currencies and the diversification benefits of the floating Swedish krone, and 4) governmental investment promotion organizations have a rather small role in the actual investment decision making process. Their role is rather in giving general information on the country's investment environment. The most important differences between the samples of firms are: 1) in the real estate sector the majority of FDI is done through buying an existing firm, whereas in the sample of Finnish firms most FDI is done as a greenfield investment (establishing a new firm), 2) among the real estate firms Sweden, Finland, Germany and Poland are the most important destinations for FDI, while in the Finnish sample of firms (including more manufacturing and service firms) St Petersburg, Poland, Estonia and Sweden are the most important destinations, 3) in the sample of real estate firms R&D and the proximity of the Russian market are not important motives for FDI, contrary to the Finnish, more manufacturing and retail trade-oriented sample, and 4) among the real estate firms the potential for large increases in real estate prices is an important motive for FDI

EU: N laajenemisen vaikutukset suomalaisten yritysten strategioihin

Tässä tutkimuksessa tarkastellaan sitä, millaisia vaikutuksia kymmenen uuden jäsenmaan liittymisellä Euroopan unioniin vuonna 2004 on suomalaisten yritysten strategioihin. Asiaa lähestyttiin tekemällä analyyseja uusien jäsenmaiden taloudellisesta tilanteesta, arvioimalla ongelmia tässä suhteessa sekä uusien jäsenmaiden konvergenssin nopeutta reaalisen tulotason, palkkojen ja hintojen osalta kohti EU-15-maita, analysoimalla verojärjestelmiä ja verokilpailua, pohtimalla työvoiman liikkuvuuden vaikutuksia Suomen työmarkkinoilla sekä laatimalla yrityskysely, joka koski suomalaisten yritysten suunnitelmia uusien jäsenmaiden markkinoiden suhteen. Uusien jäsenmaiden markkinat kasvavat keskimäärin nopeammin kuin vanhojen jäsenmaiden ja niissä on alemmat tuotantokustannukset. Tämä mahdollistaa liiketoiminnan kasvun viennin ja suorien sijoitusten kautta. Mahdollisia riskejä muodostuu muun muassa uusien jäsenmaiden epävakaamman talouskehityksen ja erityisesti uusien jäsenmaiden markkinoilla lisääntyvän kilpailun kautta.We study the effects of EU enlargement in 2004 on the strategies of Finnish firms. First, we analyse the economic situation in the new member countries and their speed of convergence towards the levels of real incomes, wages and prices in the EU-15 countries. Then we analyse tax systems and tax competition as well as the impact of labour mobility on the Finnish labour market. Finally, we discuss the answers to a questionnaire we sent to Finnish firms about their plans concerning the new member countries’ markets. On average, the latter will grow faster than those of the EU-15 countries and the new member countries also have lower production costs. This enables growth in business through exports and foreign direct investment. Possible risks arise through more unstable economic development in the new member countries and through increased competition

Finland's experiences and challenges in the euro zone

In this paper we study Finland’s way to the Economic and Monetary Union (EMU) and her economic development as a member of the EMU. First, we describe the economic background of the membership and the arguments presented in research and discussion for and against it. Then we describe Finland’s economic performance in the Euro zone. The main part of the paper consists of an analysis of the Finnish economy in terms of some crucial determinants for an optimal monetary union. These include differences in production structures, differences in the country composition for exports, output variations, housing sector developments, interest rate developments in comparison with the Taylor-rule based rates, labour market flexibility, and fiscal policy. Finland is analysed in the context of other EMU and EU countries, so the paper includes comparisons with them, too. Finland has performed very well until now. The analysis of the structural and cyclical factors of the economy indicates, however, that the Finnish economy continues to differ crucially from the core Euro zone countries. This means that the adjustment mechanisms, including labour market flexibility and fiscal policy, must be maintained effective and in some respects even be strengthened

Determinants of Finnish-Russian economic relations

The broad context of the study is the main determinants of Finnish-Russian economic relations during the post-Soviet era and the prospects for the future. The study explores the determination of trade as well as foreign direct investment (FDI). The main emphasis is on the structure and development of foreign trade. When measured by the Grubel-Lloyd index of intra-industry trade (SITC3, 4-digit), it is seen that less than 3 per cent of Finnish-Russian trade occurred inside the same industry in 2004. This percentage has even declined slightly during the period studied. In Finland’s trade with Germany, the corresponding figure was 31 per cent and in trade with Sweden 47 per cent in 2004. When assessing the development of Finnish imports from Russia, we notice that the dominance of changes in oil prices and of imports of big companies does not allow sensible econometric explanations. In the case of Finnish exports to Russia we find econometric evidence on volumes and values, on aggregate and sectoral, and on annual and quarterly exports. We present several kinds of classifications of FDI, and ask which factors favour exports and which FDI. We also classify the investments of Finnish firms in Russia according to these criteria – in a very illustrative and preliminary way. Exports as well as FDI have profited from the high market growth and rapid structural change of the Russian economy

Elintarvikkeiden hinnanmuodostus ja markkinoiden toimivuus

The study analyses the price formation and market functionality of the Finnish food chain. A significant portion of the report consists of international comparisons. The main comparison countries are the so-called old EU countries (EU15) of Western Europe, the new EU countries (EU12) and the United States. Comparisons are also made with individual countries. After the international comparisons, the price formation of the food chain, degree of concentration, competition, and the position of small producers is analysed for Finland in more detail. The main findings of the study are as follows: 1) a significant reason for the high price of foodstuffs in Finland is the high VAT, 2) the price level without VAT was in 2005 a couple of per cent higher and in December 2009 about 7 per cent higher than the average in the old EU countries, but it is considerably higher than in the new EU countries and the United States, 3) In Finland the price level of foodstuffs is elevated by the weak agricultural competitiveness (northern location and small farm size); on the other hand, the competitiveness of the foodstuffs industry and the wholesale and retail trade is rather good, 4) measured in terms of price-cost margins, competition works in Finland just as well in agriculture, the foodstuffs industry and the wholesale and retail trade as it does in the food chain of the comparison countries, 5) the large share of the wholesale and retail trade in the Finnish food chain is attributable to higher transport costs than in the comparison countries, 6) in Finland the prices of foodstuffs have moved in the same direction as in comparison countries, albeit with a lag of a few months; in 2009 the prices of dairy products, butter and margarine, meat, fish products and food products nevertheless fell by considerably less than in the comparison countries and less than the development of producer prices would have indicated, 7) the foodstuffs industry and the wholesale and retail trade are concentrated sectors; enterprises nevertheless compete with each other and with imports, 8) the degree of concentration, agreement practices and price development should be monitored especially in product groups where consumer prices have not fallen in line with a decline in producer prices, 9) access of small producers to markets is important from the standpoint of competition and consumer choice; the position of small producers can best be improved by fostering the exchange of information within the chain

Asukaslähtöinen puukerrostalokortteli tilaelementeistä: Esimerkkinä Kokkolan Nukkumatin tontin suunnitelma

Selvitys tarkastelee asukaslähtöistä puutilaelementtirakentamista asuinympäristön, asuinrakennuksen ja asunnon tasoilla. Asukas-lähtöisyys käsitteenä asuntorakentamisen yhteydessä tarkentaa käyttäjälähtöisyyden käsitettä.Puutilaelementtikerrostalorakentamisen tuotannosta johtuvat erityisominaisuudet vaikuttavat pääosin asuntojen ja asuinrakennuksien suunnitteluratkaisuihin. Kun asuntoon sisältyy mahdollisuus mukautua käyttäjien tarpeisiin, on rakennuksen todennäköinen käyttöikä pidempi ja käyttöaste parempi. Siksi selvityksessä tarkastellaan joustavan tilaelementtirakentamisen mahdollisuuksia joustavan vyöhykkeen periaatteen sekä kolmen tilaelementtien sijoituslogiikan avulla. Tarkastelua tukee kirjo tutkielmia, jotka käsittelevät puutilaelementti-kerrostaloasuntoja sekä niiden joustavuusvariaatioita.Selvityksessä tavoitellaan myös – tuotantotavasta riippumatta – asuinympäristön arvostuksien parempaa ymmärrystä sekä tulkintaa siitä, miten rakennettua ympäristöä voidaan kehittää asumispreferenssien pohjalta. Lisäksi tarkastellaan, mitä potentiaalista etua puutilaelementtirakentamisessa voisi olla asuinympäristöpreferenssien toteuttajana.Selvitystyössä yhdistyy käytännön suunnittelutyö ja teoreettisempi tarkastelu. Selvitystyöhön liittyy kaksi tapaussuunnitelmaa, joista esitellään Kokkolan keskustaan sijoittuva puukerrostalokortteli.Selvityksen tavoitteena on sekä kartoittaa tilaelementeistä koostuvan puukerrostalorakentamisen tarpeellisia kehitysosa-alueita arkkitehtuurisuunnittelun näkökulmasta että toimia idea- ja tietopankkina tilaelementeistä koostuvan puukerrostalokorttelin suunnittelussa.This study examines resident-oriented modular timber framed construction in relation to the residential environment, multi-storey apartment buildings and apartments. Resident-orientation is a concept that in housing construction terminology, specifies the concept of user-orientation.Special features of the production of modular timber framed construction affect design mainly in the scales of apartments and apartment buildings. When an apartment can be modified to suit the user's needs, a building's service life and the degree of utilisation increase. This study examines the possibilities of adaptable modular timber framed housing construction using the principle of adaptable zones and examples of three placement methods of modules as a tool. The analysis is supported by a large variety of modular timber framed apartment studies and their adaptable variations.The study also attempts to better understand – regardless of the production method – the appreciation of residential environments and seeks to find an interpretation of how the built environment can be developed on the basis of residential preference studies. In addition, the study analyses the potential benefits of modular timber framed construction for realising residential environment preferences.The study combines practical design and theoretical analysis. The study has incorporated two case designs, of which one modular timber framed housing block in central Kokkola is introduced. The aim of the study is to both determine necessary areas of development regarding modular timber framed building construction from the viewpoint of architectural and housing design; and to function as a resource for ideas and knowledge regarding the design of modular timber framed housing blocks