Browsing by Author "Jurvanen, Outi"

The Finnish productivity growth has been sluggish in the period after the great financial crisis. According to Schumpeterian growth theory, produc- tivity growth depends on innovation and competition between firms. In the United States, the productivity slowdown that has occurred during recent decades has been linked to the simultaneous decline in business dynamism. Therefore, this thesis investigates the Finnish competition and business dy- namism in the period between 2004 and 2018, using dynamic and static competition indicators. The main data sources of this work are two micro-aggregated databases developed by the OECD. Due to their high level of harmonization, a compar- ison between Finland and a benchmark group of countries is possible. The work presents descriptive results and then investigates the relationship be- tween the different indicators with fixed effects regression models. The work finds that, when measured with dynamic indicators (entry rates, up or out dy- namics, and job reallocation rates), the level industry dynamism in Finland is as high, or even higher than in the benchmark. Regarding the static indica- tors of competition, industry concentration appears to be higher than in the benchmark, and has increased in the recent years. However, concentration is not linked to increases in mark-ups or entry rate decline. Instead, it can be linked to the reallocation of resources to more productive firms. Nevertheless, allocative efficiency, as measured with Olley and Pakes covariance, is weaker than in the benchmark group of countries. However, low productivity disper- sion between firms may partly explain this. The results are mostly robust to earlier evidence on Finnish business dynamism. The study concludes that the state of competition and business dynamism in the Finnish private sector is good and thus does not seem to be the scape- goat for the productivity slowdown in Finland. However, the low levels of allocative efficiency and the factors behind it call for further investigation. Regarding markups, the results contract some results acquired earlier, and it would be interesting to compare different markup estimates, and study the relationship between the different estimates and innovation, concentration and productivity growth.