of politicians nor those of the voters. For instance, the debate leading to the parliamentary election of 2007 did never focus on that issue (in contrast to the political debate in the 2006 Swedish electoral campaign). Instead, the main electoral themes were purely redistributive ones. Yet, the demographic transition is going to be much faster in Finl<strong>and</strong> than in Sweden <strong>and</strong> Denmark, <strong>and</strong>, as noted, labour force participation rates in Finl<strong>and</strong> for the young <strong>and</strong> the elderly are clearly lower than <strong>Nordic</strong> averages. <strong>The</strong> labour market: enough workers working enough? · 117
ENDNOTES 1 In his history of the economic policy initiatives of the Swedish trade unions, Villy Bergström (2007) shows how committed the Swedish trade union federation LO was from the outset to technical progress <strong>and</strong> economic openness. 2 See Böckerman <strong>and</strong> Uusitalo (2006). 3 See Kleven <strong>and</strong> Kreiner (2006), a longer version of which is available as CEPR Working Paper 5594, April 2006. 4 Estimates of microeconomic labour supply normally imply low elasticities for individuals of prime working age who are already working. Intuitively, changes in the tax schedule change the slope of the individual’s budget line marginally, <strong>and</strong> the individual therefore adjusts his/her labour-leisure choice only marginally. In fact, hours-of-work elasticities, conditional on the person already working, turn out in many studies to be close to zero for prime age male individuals. It is well known that the labour supply of women is more elastic, but even in the case of women it is crucial for policy makers to affect the participation decision <strong>and</strong> not only the hours decision. 5 <strong>The</strong>oretical modelling of th e choice at the extensive margin typically assumes that there are significant fixed costs of participating in the labour market. This makes intuitive sense, since it is for many individuals quite impractical <strong>and</strong> costly to carry out a little amount of work only – for example, the individual has to travel to the workplace, it takes time to learn a new job, <strong>and</strong> the employer has to incur administrative costs also for part-time employees. 6 See Kleven <strong>and</strong> Kreiner (2006), who use micro data on taxes <strong>and</strong> benefits for the EU15 countries, Eissa <strong>and</strong> Liebman (1996), <strong>and</strong> Blundell <strong>and</strong> MaCurdy (1999). 7 Some calibrated theoretical models start to make sense of the large hours gap between Europe <strong>and</strong> the United States; see, in particular the calibrated model of labour supply over the life cycle by Rogerson <strong>and</strong> Wallenius (2007). <strong>The</strong> focus of their analysis is precisely on the life cycle pattern of labour supply: at which age will an individual start his/her productive career, <strong>and</strong> at which age is the individual likely to retire? 8 As estimated by the National Institute of Economic Research (Konjunkturinstitutet), Stock holm, (“<strong>The</strong> Swedish Economy”, December 2006). 9 For example, Uusitalo <strong>and</strong> Hakola (2001) show how the flow into early retirement in Finl<strong>and</strong> depends on the incentive of both the employer <strong>and</strong> the employee to initiate such a move. 10 See table 1.5 in Cahuc <strong>and</strong> Zylberberg (2004), partly based on Maddison (1995). 11 In Finl<strong>and</strong>, there is a programme giving tax incentives for taking a year off work or a sabbatical year (“vuorotteluvapaa”). In Sweden a similar scheme (“friår”) has been used, though it was recently abolished by the Reinfeldt government. 12 See Peter Fredriksson <strong>and</strong> Bertil Holmlund (2006). 13 Sweden has established a research institute (IFAU, Institut för arbetsmarknadspolitisk utvärdering) that carries out sophisticated evaluations of active labour market policy programmes. 14 See Forslund <strong>and</strong> Holmlund (2003). 15 However, there is also an effect in the opposite direction by these programmes: participation may improve the individual’s attachment to the labour market <strong>and</strong> strengthen his/her individual competitiveness as an employee – because of, say, newly acquired skills. This could modify the wage claims of unions, as they know that any newly unemployed member will encounter harder competition from part of those currently unemployed. It may also be noted that some studies have used data on individual labour market careers to analyse the effects of programme participation on the probability of getting a job. Even those effects turn out to be very weak or even of the wrong sign. For example, Fredriksson <strong>and</strong> Johansson (2003) find that the participation in job creation or training programmes reduces the individual’s chance of finding a job. 16 See Forslund <strong>and</strong> Holmlund (2003). 17 See also Fredriksson <strong>and</strong> Holmlund (2003, 2006) who argue that the case for imposing a penalty on less active job search is theoretically solid. 118 · <strong>The</strong> <strong>Nordic</strong> <strong>Model</strong>
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The Nordic Model Embracing globaliz
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ETLA B232 ISBN 978-951-628-468-5 IS
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THE AUTHORS Torben M. Andersen is P
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CONTENTS PREFACE THE AUTHORS 1 INTR
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8.5 The future of public services -
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Globalization is primarily an oppor
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ices financed by taxes, which are h
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14, respectively, out of a total of
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are the effects of technical change
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not contesting economic growth as t
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1.6 AN EFFECTIVE WAGE BARGAINING PR
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etter be tried in individual cases
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The scheme of the social contract c
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is worthy and realistic. But the de
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supportive interaction of openness
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The financial deregulations in the
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horizontal axis). These indices are
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does can nowadays be seen, in a bro
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employment increases in the public
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are not at the top of the league, t
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ENDNOTES 1 Wikipedia refers to popu
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consider employment and productivit
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from the mid-1980s. Finland has gra
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% 7 6 5 4 3 2 1 0 IT expenditure, %
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As technological change is to a sig
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3.3 SOCIAL EQUALITY Economic effici
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0.9 0.8 0.7 Net Fin Den 0.9 Composi
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ANNEX: GROWTH ACCOUNTING The Nordic
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sources of GDP growth in the EU15,
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11 These decompositions have been c
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4.1 THE WELFARE STATE AS A SOCIAL C
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