Employment effects of a payroll tax cut – Evidence from a regional tax subsidy experiment

The Finnish government implemented a temporary exemption from employer social insurance contributions for the employers that are located in high unemployment areas of the Northern Finland. The payroll tax exemption was designed as an experiment that aimed to evaluate employment effects of a regional payroll tax reduction. As a result of the experiment payroll taxes were reduced by 3 – 6 percentage points for three years beginning in January 2003. In this paper we evaluate the employment and wage effects of the regionally targeted payroll tax reduction. We compare the employment and wage changes in the target region to the employment and wage changes in a control region with a similar unemployment rate and industry structure than the target region. As finding an identical control region is not possible, we adopt a matching procedure by choosing, for each firm in the target region, a matched pair from the control region. We perform propensity score matching and use the estimated propensities as balancing scores to create a control group of firms that is similar to the treatment group in all the observable pre-treatment characteristics. We then estimate the effect of the payroll tax reduction using difference-in-differences estimators, essentially comparing employment and wage changes between the matched pairs after the start of the experiment. We report results from both nearest neighbour and kernel matched comparison groups. To enhance the transparency of the evaluation we have created the matched firm pairs from the plant database of Statistics Finland and designed and published the evaluation method before any data on employment or wage outcomes were available in December 2003. We will follow the employment change of the selected firms based on annual tax reports that will be available in March 2004. Detailed information on the wage responses will be added to the report in May 2004 based on the payroll data of the members of The Confederation of Finnish Industry and Employers and The Employers Federation of the Service Industries.

Interacting demand and supply conditions in European bank lending

This paper investigates credit channel of monetary policy by accounting for simultaneous interaction of banks' and firms' credit conditions and their adjustment costs, which are neglected in the previous studies. Based on the European data we find that these conditions are interacting, although their adjustment costs differ across banks, firm size, countries, and over time. The results suggest that a common European monetary policy should then deal with uncertainty over credit market conditions and firms' and banks' country-specific and size-dependent reactions. It should also monitor large firms' exploitation of banks' credit rationing as it can have great impacts on the smaller firms' lending and financial stability conditions.Demand and Price Analysis,

Employment effects of a payroll-tax cut - evidence from a regional tax exemption experiment

In this paper we evaluate the effects of a regional experiment that reduced payroll-taxes by 3–6 percentage points for three years in Northern Finland. We match each firm in the target region with a similar firm in the control region and estimate the effect of the payroll-tax reduction by comparing employment and wage changes within the matched pairs before and after the start of the experiment. According to our results the reduction in the payroll-taxes led to somewhat faster wage growth in the target region. The increase in wages offset roughly half of the impact of the payroll tax cut on the labour costs. The remaining labour cost reduction had no significant effects on employment.Payroll-tax; Labour demand; Tax incidence; Propensity score matching

Structure-preserving mesh coupling based on the Buffa-Christiansen complex

The state of the art for mesh coupling at nonconforming interfaces is presented and reviewed. Mesh coupling is frequently applied to the modeling and simulation of motion in electromagnetic actuators and machines. The paper exploits Whitney elements to present the main ideas. Both interpolation- and projection-based methods are considered. In addition to accuracy and efficiency, we emphasize the question whether the schemes preserve the structure of the de Rham complex, which underlies Maxwell's equations. As a new contribution, a structure-preserving projection method is presented, in which Lagrange multiplier spaces are chosen from the Buffa-Christiansen complex. Its performance is compared with a straightforward interpolation based on Whitney and de Rham maps, and with Galerkin projection.Comment: 17 pages, 7 figures. Some figures are omitted due to a restricted copyright. Full paper to appear in Mathematics of Computatio

Modelling procurement effects on cooperation

Cooperative arrangements, such as partnering, have received increased interest in recent years. Several studies show however that cooperative relationships are not easily achieved in construction. Implementation of cooperative relationships requires changes in several elements of the traditional procurement procedures. The purpose of this paper is therefore to propose and test a sequential model regarding clients’ cooperative procurement procedures. We especially ask: what elements in clients’ procurement procedures facilitate the establishment of cooperation and trust in their relationships with contractors? The model was tested through structural equation modelling. The empirical data required for the test were collected through a survey responded to by 87 Swedish professional construction clients. The empirical results show that cooperative procurement procedures are triggered by clients’ wish to involve contractors early in specification, which has a simultaneous effect on procedures regarding bid invitation and compensation. Furthermore, these simultaneous effects breed a certain kind of partner selection based on task-related attributes, which also has a direct positive effect on trust and above all on cooperation in client–contractor relationships. Besides these implications from the model, the improvement of measurements for future modelling is discussed.Construction; cooperation; procurement;

It’s all about Trust and Loyalty: Partner Selection Mechanisms in Tourism Networks

Does expected partner or task related criteria affect how trust and loyalty is developed between tourism firms? This paper poses a model, which is developed on the assumption that well defined partner and task related partner expectations and experienced trust, should build loyalty between tourism firms. The model provides a more precise assessment for scholars, which believes that trust is related to the risk that is associated with personal relationships between two or more firms, and that risk depends on expectations that are derived from personal relationships. The model also integrates the role of experienced trust in transforming different partner selection criteria into loyalty. The contribution of the model is that it provides insights into cooperative relationships by examining the role of trust between small tourism firms when cooperation is established. Data from a sample of 96 tourism firms in the Northern U.S. is used to test the model. The findings provide implications for tourism scholars and policy-makers who are interested in developing managerial strategies that are based on personal relationships