External shocks, market structure and sectoral employment in Finland
The study examines Finland’s economic development from the perspective of the so-called Dutch disease model, with particular attention to the effects of forest industry price fluctuations on the rest of the economy.
In Finnish economic debate, it has traditionally been held that the openness of the economy limits the room for manoeuvre in cyclical policy and that the large price fluctuations in the forest industry are the principal source of instability in the export sector. The Dutch disease model — which takes its name from the adjustment difficulties observed in connection with the discovery of natural gas reserves in the Netherlands — provides a theoretical framework for analysing such phenomena.
The study tests the standard Corden-Neary model using Finnish data and finds that the model does not fully fit Finland’s cyclical picture: for example, the effects of a forest industry boom on the competitiveness of other industry and on the allocation of labour run in part in a different direction from what the model would predict. For this reason, the study develops the model with assumptions of imperfect competition, which appear to explain the observed contradictions more satisfactorily. (AI translation)
- ISSN: 0358-5980
- ISBN: 951-9282-21-1
