Browsing by study line "Research track"
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(2023)This thesis focuses on the investigation of adverse selection and moral hazard in the Finnish entrepreneurial insurance system. The thesis builds upon previous research on moral hazard and adverse selection in insurance markets, but focuses specifically on the social insurance market for entrepreneurs within sickness and parental allowances. This topic is of interest as mandating social insurance for entrepreneurs is vital, but often lacking due to the flexible nature of entrepreneurial activity. As a result, the social insurance systems may be subject to adverse selection and moral hazard. Rich panel data on insurance contributions of entrepreneurs in Finland allows me to measure the extent of asymmetric information both overall and dynamically. To test the former, I use a positive correlation test. In particular, the test looks at the probability of sickness or having a child in relation to insurance contributions. The results indicate a slight positive correlation between sickness risk and insurance contributions as well as the probability of having a child and insurance contributions. A more significant result is found for the risk of having children in a dynamic sense, showing a strong indication of a rise in insurance contributions around the time of receiving parental allowance. However, the results are more ambiguous in the case of sick pay. These results are robust to several controls as well as two separate identification strategies. Due to the endogeneity of illness or choosing to have children, causal conclusions cannot be drawn from the results.

(2022)Regret is the value lost by playing an action on the current round of a iterative game. The idea of regret matching is to generate strategies that minimize regret, since it is guaranteed by folk theorem to converge to Nash Equilibrium in a twoplayer zerosum game. Storing cumulative regrets after each iteration enables to use of regret matching. It is an algorithm that chooses next iteration strategy based on the cumulative regrets of the actions. This procedure itself would converge to Nash Equilibrium in a normal form game zerosum game. For extensive form game the data storing will become too resource demanding, when the game size is even moderate. However, it's possible to minimize regret on each information set separately using counterfactual regret. Counterfactual regret is calculated by using counterfactual values. Counterfactual value calculates expected value given that player tries to get to an information set and play a certain action in it. The difference between the action and expected value of the information set is counterfactual regret. Similarly minimizing regrets converges toward Nash Equilibrium. Using counterfactual regret minimization framework I create an iterative selfplay algorithm to solve twoplayer zerosum imperfect information games. In this thesis I work with last betting round of limit Hold'Em. CFR+ uses improved strategy averaging, does not store negative regrets and alternates between strategy updating player. I did eventually manage to construct CFR+ algorithm, and it seems extremely effective compared to earlier versions of the algorithm.

(2022)The opportunity costs of defence and the impact of defence spending on economic growth aroused the interest of researchers during the Cold War. The question is topical again, as the war in Ukraine has accelerated international armaments and increased investments in defence. For Finland and Sweden, the issue is also important in terms of future NATO membership, because NATO recommends that its member countries spend at least 2% of GDP on defence. Achieving the limit requires an increase in defence spending from both countries. No case studies on the impact of defence spending on economic growth have been published about Finland and Sweden, but the countries have been discussed as part of broader panel materials. This thesis fills the gap. The thesis applies structural vector autoregressive methods to analyse the period from 1960 to 2021. Granger causality is included in the analysis, because–despite its problematic nature–the concept has a central position in the history of the research topic. Previous literature has considered the identification of a structural model challenging because the determination of bidirectional causality would require a suitable exogenous variable, which is almost impossible to find in this context. The view is challenged by suggesting that a partial identification can be accepted when the interest is focused only on the defence spending shock. The alternative analysis concerning a shorter time period tests the sensitivity of results to a time period. The impulse response analysis suggests that the impact of defence spending on GDP is slightly positive for both countries, but statistically significant only for Sweden. Granger causality is not observed in either direction for either country. Finland's neutral result is in line with expectations and previous literature, but Sweden's positive result is contrary to expectations. The alternative analysis concerning the postCold War era confirms that the Finnish result is robust regardless of the time period. The inconsistency with previous literature and the challenges caused by conditional heteroskedasticity raise doubts about the reliability of the Swedish result. The thesis indicates that increases in defence spending will not harm economic growth in Finland and Sweden. The result is surprising, as it has been suggested that previous studies have underestimated the negative impact of defence spending and most of the recent literature supports a negative or neutral impact. Further research is needed, especially on the impact mechanisms and the causes of heterogeneity. Decomposing defence spending could provide answers to unresolved questions.

(2022)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 microaggregated 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 markups 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.

(2022)The phrase 'central limit theorem' has commonly come to stand for a result where partial sums of random variables converge to a gaussian random variable in the sense of distribution. Theorems of this nature readily yield applications to statistics and econometrics since they form the theoretical basis of approximating the sampling distribution of a given test statistic when the exact distribution may be intractable or otherwise infeasible to be retrieved. Faced with such a situation, a researcher can instead ask whether the test statistic, or a certain transformation of it, converges in distribution as the sample size grows without bound. If the answer is in the affirmative, then one may in a principled manner approximate the distribution of the finitesample statistics with that of the limit distribution such that the approximation can be made in some sense arbitrarily good by sufficient increases in the sample size. Naturally, similar procedures apply in the case of estimators. These asymptotic normality results for econometric estimators, as they are called, require differing conditions to be satisfied depending on the nature of the datagenerating process where the observations are thought to originate from. This thesis examines a selection of foundational central limit theorems in the cases of I.I.D., independent, D.I.D., and dependent datagenerating processes and presents examples of their econometric applications, primarily to deduce asymptotic normality for a selection of key econometric estimators.

(2019)The design of college admissions has been a heatedly discussed topic in Finland, as recent government initiatives have led to a more centralized system. Some argue for letting colleges decide on their admissions procedures, while others believe that a centralized matchmaking procedure with priorities determined by the matriculation examination would be more costeffective. This thesis aims to characterize various factors that the policy maker must take into account when designing a college admissions procedure, in light of existing theoretical research on both centralized and decentralized matching markets and empirical studies on social determinants of college choice and the capacity of entrance examinations to elicit information on student ability and motivation. The twosided matching literature is discussed extensively because of its usefulness for designing centralized clearinghouses for matching markets. The studentproposing deferred acceptance algorithm emerges as the best choice for a policy maker who regards strategyproofness and respecting of priorities as especially important, at least if manipulation by colleges is implausible. However, strategyproofness is fragile in practical applications, applicants may try to manipulate also strategyproof mechanisms and reporting the whole preference relation is still only weakly dominant. Consequently, satisfaction of reported preferences should not be taken as evidence of welfare properties of a matching without qualifications. The use of a common entrance examination may be more cost effective than a system based on collegespecific entrance examinations, as colleges do not then need to spend resources on organizing the examinations. However, students have then stronger incentives to perform in the common entrance examination, and there is already evidence that more students retake the matriculation examination in Finland. The overall effect on the costs of organizing entrance examinations is an uncertain empirical matter. The importance of preparation courses is likely to decrease, which saves resources and contributes to socioeconomic equity. On the other hand, making students choose on their study paths earlier in life may erode socioeconomic equity. A larger role for the matriculation examination provides stronger incentives for showing effort in high school, which the policy maker may see as beneficial. While a system with a common entrance examination makes it possible for a student to get admitted to a second preference when she is rejected by her first preference, it remains an empirical question to what extent this reduces the propensity to apply again to competitive colleges. The excess demand for certain colleges is a result of student preferences and is not solvable by any mechanism that gives a strong priority to satisfying student preferences.

(2023)Failures in bargaining, such as strikes or stalled climate change negotiations, are costly for all parties. So why does bargaining fail when mutually beneficial agreements exist? In the thesis, the classical problem of bilateral bargaining is studied by the means of a new laboratory experiment and a literature review of related theoretical and experimental work. The main focus is on the role of commitment tactics as a source of conflict. In the literature, complete information bargaining is often deemed to be efficient whereas incomplete information is considered to be the main driver of delay. However, by simply allowing the negotiators to attempt strategic commitments that are costly to make and uncertain to succeed, unique predictions of inefficient equilibria are obtained even when bargaining under complete information. The main theoretical framework of the thesis is a dynamic bilateral bargaining model of tough negotiations and delayed agreement. In the unique stationary Markov perfect equilibrium of the model, the bargaining takes the form of a war of attrition. Negotiators initially commit themselves to incompatible demands but an agreement is reached once a commitment decays. The rates at which the commitments decay determine the expected duration of the conflict. Moreover, if the negotiators do not differ in patience the one with the stronger commitment receives in expectation a larger share of the contested surplus. The predictions of the model are tested in a new laboratory bargaining experiment. The analysis of the pilot round shows mixed results. We find some conflict and inefficiency in bargaining due to initial incompatible commitments. Furthermore, in line with the theory, more than half of the agreed offers have a different outcome than the prevalent equal sharing of much of the experimental bargaining literature. However, it cannot be concluded that the data would be completely in line with the hypotheses. The different rates at which the commitments decay do not always determine the bargaining outcome and length of the delay. Slight modifications to the experimental design, which may solve the issues detected, are discussed. The different delay patterns observed in various reallife bargaining contexts suggest that there is not a single approach which could explain all the inefficiencies. The approach emphasizing the role of strategic commitments provides an alternative to the incomplete information explanation. However, despite the rich theoretical literature, only a few experimental studies testing the commitment models exist. The pilot round of our experiment is an important contribution to this branch of bargaining literature. Certainly, further empirical research is required in order to better understand the exact role that strategic commitments have in different conflicts.

(2020)This thesis evaluates the effects of entry on incumbent firms' prices and procedures volume in dental care markets using differenceindifferences regression and administrative data on private dental care visits reimbursed by the Social Insurance Institution of Finland. The entry is considered as a competition increasing shock. The entrant's prices were remarkably low at the time of the entry and the firm was able to acquire a large share of volume in common procedures performed at the market. Thus, the entrant offered a real lowcost alternative to the residents of the Capital Region. I focus on examinations and fillings, which are two of the most common procedures. Patients face switching costs when changing their dental care provider. This means that incumbent firms with lockedin customers might be able to accommodate the entry easier, than without the switching costs. The results show that incumbent firms do not lower their prices in response to the entry by economically significant amount. However, the results suggest that incumbent firms perform less fillings after the entry. The effect is driven by summer months. The pattern where the incumbent firms do not change their prices and lose a share of their turnover to the entrant is consistent with the theoretical switching costs literature.

(2019)In this thesis, a conditional BVARX forecasting model for short and medium term economic forecasting is developed. The model is especially designed for smallopen economies and its performance on forecasting several Finnish economic variables is assessed. Particular attention is directed to the hyperparameter choice of the model. A novel algorithm for hyperparameter choice is proposed and it is shown to outperform the marginal likelihood based approach often encountered in the literature. Other prominent features of the model include conditioning on predictive densities and exogeneity of the global economic variables. The model is shown to outperform univariate benchmark models in terms of forecasting accuracy for forecasting horizons up to eight quarters ahead.

(2021)Despite continuous improvements in treatments, childhood cancers are among the most common causes of death for children in Finland. The cancer treatments are often arduous and have longlasting effects even beyond the person diagnosed. Estimating these effects is important, since they can affect the costeffectiveness of many policies. This thesis focuses on estimating the effects of childhood cancer on parental labour market outcomes, especially on the earnings gap between genders. Estimating the causal connection between health and socioeconomic variables is difficult for many reasons. In this thesis, a quasiexperimental method called "staggered differencesindifferences" is employed to solve this problem. In this method, families where cancer is diagnosed are compared to those that are diagnosed at a different time, and this way the true causal effect can be estimated. The thesis used administrative data from all childhood cancer diagnoses in Finland during years 19992017. The results show that childhood cancer reduces parents' income significantly. In short run, the effect is around 30% of the income before the diagnosis for mothers and around 7% for fathers. For mothers, the decline in employment is also significant. The welfare state provides support to these families to the extent that the decline in the income after transfers is not as large. The gender earnings difference increases around 20% in the short run, and increases also in families where mother is the main provider in the years before the diagnosis. My results are robust to different checks, including alternative estimators to correct for possible cohortheterogeneous effects. The previous research is scarce and has provided differing estimates, but the results of this thesis are in line with the most relevant literature. The decline in earnings can be caused by the need to take care of the child, mental health effects or declined accumulation of human capital. While it is hard to suggest policy changes based on these results alone, the current benefits around ill children are short in duration and focused on one person and the results indicate that perhaps a longer benefit scheme distributed more evenly between genders might provide different outcomes.

(2020)I study whether modest copayment increases affect the general practitioner (GP) use in Finland, a country with relatively low copayments, low inequality, and an extensive welfare state. I also examine whether the estimates are driven by certain low–income groups considered to be economically vulnerable. The Finnish Government allowed municipalities to increase copayments in 2015 and 2016 by 9.5% and 27.5% respectively. At maximum, this meant that the copayment for a GP visit was 20.90 euros at the beginning of 2016, approximately 40% higher than at the end of 2014. Almost all municipalities made the 9.5% increase at the start of 2015, but some of them decided not to make the 27.5% increase at all or made smaller increases. I exploit this variation by estimating two–way fixed effects regression models, and I use population–wide administrative data containing all primary healthcare visits in 2013–2018 and socioeconomic information on patients. In the models, copayment increases are negatively associated with both GP use and median waiting times. Based on the means of estimates from several specifications, the 27.5% increase alone is associated with a 2% decrease in visits per resident in the first four quarters after the change and a 6% decrease thereafter. The estimates are not statistically significant. The median waiting times decrease by two days in the first year after the change and five days thereafter, and these results are significant. When I estimate the effects of both increases, the means of estimates are now a 5% decrease in visits per resident in the first four quarters after the last increase and an 8% decrease thereafter. Some of the estimates are statistically significant. I find no evidence to support the hypothesis that the low–income groups were more sensitive to the increases. However, the confidence intervals are wide across the study, suggesting that the design may be underpowered to detect small effects from zero. Moreover, the point estimates are surprisingly far from zero, which is especially surprising when upper income quintiles are concerned. Therefore, more evidence is needed to be able to make firm conclusions about the causal effects of policy changes.

(2022)Conflictrelated violence and fragility are among the core development challenges of our time. Over the past decades, most armed conflicts have comprised one or more nonstate actors, and conflicts commonly arise among domestic actors. These nonstate actors cannot resort to conscript armies and thus need to motivate citizens to join their ranks. Due to this, addressing individual participation motivations is an integral part of the study of conflict. Armed conflict participation is puzzling because it comes with significant risks. In contrast, the possible benefits of conflict outcomes are often public and nonexcludable goods, making conflict participation subject to a free rider problem. This thesis provides a narrative literature review of individual participation motivations in the presence of the free rider problem. The focus is on situations where individuals are not conscripts, and the armed groups cannot mobilise an existing reserve of combatants. The existing economic literature has addressed individuallevel conflict participation motivations relatively little. This thesis assesses different motivational factors’ ability to solve the free rider problem and seeks to inspire future research. Both theoretical and empirical literature is covered. This thesis addresses three motivational factors: (1) material incentives and the opportunity cost of participation; (2) grievances and socioemotional incentives; and (3) negative incentives, particularly forced participation and the cost of nonaction. This thesis does not seek to determine which motivation provides the best explanation. Instead, the logic behind each motivational factor is illustrated, and their ability to solve the free rider problem is critically evaluated. This thesis concludes that each motivational factor can help solve the free rider problem, but relying on a single motivation is often insufficient. This thesis recommends that economists look beyond material incentives and account for various motivations. Complementing material incentives with socioemotional and negative incentives, in particular, gives a fuller picture of why individuals are willing to participate and risk their lives in conflict activities. However, further empirical research is needed to identify and test the abovementioned motivations.

(2020)We consider a socalled principalagent problem, where our aim is to construct an optimal contract that maximises utilities for the contractor, the principal, and for the effortexerting party, the agent. In our setting, the timehorizon of the contract is infinite, and the agent receives a continuously paid compensation for exerting effort. Our main goal is to establish a problem introduced in Sannikov (2008) and characterise an optimal contract by restricting the menu of feasible contracts, an approach inspired by Cvitanic et. al. (2018) We begin with an extensive literature review, where we review the continuoustime principalagent problems and further motivate the scope of this thesis. We start from the notable article Holmström et. al. (1987), and we progress towards the works Williams (2008), Sannikov (2008) and Cvitanic et. al. (2018) Following the review, we construct the problem and lay the mathematical foundations for it. We focus on a new benchmark setting, adapted from Sannikov (2008) and Cvitanic et. al. (2018). We first define the socalled controlled state equation, and construct the canonical probability space. Then, we introduce then impose few assumptions regarding the core concepts, and identify the problems of the agent and the principal and characterise their objective functions. After characterising the problem, we characterise the optimal contract and show that the optimal contract maximises the principal's profit. We characterise the difference function of Sannikov (2008) to the agent's optimisation problem, and then follow Cvitanic et. al. (2018) on the reduction of the problem. The reduction is done by restricting the possible menu of contracts and thus reduce the nonstandard problem to a dynamic programming problem. We introduce the corresponding Hamiltonian functionals, together with the value functions to the both principal and the agent. Furthermore, we introduce a family restricted processes, which we show to characterise the optimal contract. We finish with showing that the optimal contract exists even with the notion of retirement. Having completed the main technical contribution, that is, having solved for the optimal contract, we briefly discuss the results and their implications against previous literature. Additionally, we discuss the possible extensions to our research.

(2021)Earnings insurance is a measure of how much earnings of a worker change relative to idiosyncratic shock to firm performance. In case of full earnings insurance, shocks are not passed onto earnings at all and otherwise earnings insurance is partial. Linked employeremployee data is widely used in this recent empirical research interest due to its rich nature. This paper explores earnings insurance in Finland by focusing on three aspects: how much firms in Finland provide earnings insurance, are there differences in levels of earnings insurance between industries and whether partial earnings insurance is driven by hours worked or hourly wage. The main findings are that firms in Finland provide partial but substantial earnings insurance in all industries and that hours worked play a smaller role than hourly wage in determining partial earnings insurance. Because data on hours worked is not available in many countries, this paper is able to bring new insight on the role of hours worked and hourly wage in the composition of partial earnings insurance. However, hours worked and hourly wage explain only around half of partial earnings insurance, so the result should be considered with caution.

(2023)Kuolevuus on viime vuosikymmeninä alentunut merkittävästi. Eläkejärjestelmän näkökulmasta elinajan piteneminen asettaa maksunnousupaineita, sillä eläkettä maksetaan pidemmäksi ajaksi kuin mihin oli varauduttu. Tästä syystä vuoden 2005 eläkeuudistuksessa otettiin käyttöön uusi sopeutumismekanismi, elinaikakerroin. Sen tarkoitus on sopeuttaa alkavien eläkkeiden määrä elinajanodotteen muutokseen. Lisäksi vuoden 2017 eläkeuudistuksessa on päätetty nostaa alinta eläkeikää asteittain 63 vuodesta 65 vuoteen kolmen kuukauden vuosivauhtia vuoteen 2027 asti. Sen jälkeen alimman eläkeiän nousu sidotaan elinajan odotteeseen. Edellä kuvattu kokonaisuus on edunsaajalle haastava ja elinaikakerrointa on julkisuudessa usein kuvattu ’eläkeleikkurina’. Tässä työssä elinaikakertoimen ja eliniän noston yhteisvaikutukset on kuvattu selkeästi. Muutosten tarpeellisuus on osoitettu skenaariolaskelmilla asteittain niin, että kunkin toimenpiteen vaikutus on eritelty sekä eläkejärjestelmän että vakuutetun näkökulmasta. Toimenpiteiden vaikutusten arviointiin on käytetty kahta kirjallisuudessa vakiintunutta mikrotalouden käsitettä: aktuaarinen reiluus ja aktuaarinen neutraalisuus. Tässä työssä ei arvioida edellä mainittujen käsitteiden arvoja absoluuttisina, vaan pikemminkin tarkastellaan niiden muutoksia eri sopeutusmekanismien tullessa voimaan. Laskelmissa arvioidaan myös vuoden 2005 eläkeuudistuksessa voimaan tulleen lykkäyskertoimen kannustavuutta. Arvio on toteutettu kahdella skenaariolla: ensinnä, kun työskentely jatkuu työeläkeotteella ilmoitettuun tavoiteeläkeikään asti ja toiseksi tilanteessa, jossa työskentely jatkuu yhden vuoden ajan alimman eläkeiän täyttymisen jälkeen. Laskelmista nähdään, että molempien sopeutumismekanismien voimaantulo on ollut välttämätöntä, jotta vakuutusmaksun korotuksen tarve ei olisi noussut kohtuuttomasti. Lisäksi vakuutetun näkökulmasta sekä elinaikakertoimen että alimman eläkeiän nosto kohdistuvat edunsaajille eikä tuleville vakuutetuille, kuten olisi käynyt mikäli vakuutusmaksua olisi nostettu. Kannustavuuden näkökulmasta tulokset ovat mielenkiintoisia. Työskentely tavoiteeläkeikään asti on toimeentulon näkökulmasta kannattavaa. Eläkejärjestelmän näkökulmasta se pidentää työuria ja lyhentää eläkeuria, näin ollen maksutulo kasvaa ja eläkevarallisuudet pienenevät. Vakuutetun näkökulmasta taas elinaikakertoimen pienentävä vaikutus eläkemäärässä kumoutuu lykkäyskorotuksen ansiosta täysin, ja lisäksi eläke kasvaa lisävuosien osalta myös tavallisella karttumalla. Mekanismi on siis näiltä osin toimiva. Yhden vuoden lisätyöskentelyn kannustavuus riippuu monista tekijöistä: odotetusta elinajasta, jo karttuneesta eläkkeestä ja jopa lykkäysvuoden eläkeindeksistä. Tämän tarkastelun perusteella on vaikea osoittaa, että mekanismi olisi kaikille ikä tai tuloluokille täysin toimiva. Laskelmien tulosten perusteella nähdään, että vuoden 2005 ja 2017 eläkeuudistuksissa luoduilla sopeutumismekanismeilla on merkittävä rooli maksutason hillitsemisessä elinajan pidentyessä. Lisäksi tuloksista huomataan, että sopeutusmekanismeja on tutkittava eri mittareilla, jotta havaitaan niiden kokonaisuusvaikutukset eri tilanteissa. Aktuaarinen reiluus ja erityisesti aktuaarinen neutraalisuus ovat tämän tutkimuksen perusteella osoittautuneet varteenotettaviksi käsitteiksi tähän tarkoitukseen.

(2022)This thesis studies what kind of strategic incentives a mechanism applied in Finnish college admissions in the fields of Business Administration and Economics (BAE) during 2015–2017 offers as well as how applicants respond to these incentives. A special type of a strategy that a student can only be hurt by and therefore strategically sophisticated students should try to avoid under the mechanism – referred to as the Priority Point Mechanism (PPM) – is characterised. Given this strategy, the thesis investigates whether the applicants’ behaviour is in line with some students responding to the incentives of the mechanism, and whether some students fail in responding to them. Using data on BAE applicants’ full Rank Order Lists (ROLs) and applying a First Differences approach, hypotheses associated with studying strategic behaviour are tested. The results are in line with some students strategizing under PPM: the removal of the priority points increases the probability of ranking the most prestigious programme first by 5.2 percentage points (p<0.001), and for the most prestigious programmes pairs, it increases the probability of ranking programmes with small expected cutoff differences by 5.5–12.7 percentage points (p<0.01). However, out of three programme pairs studied, for one pair the estimated effect is 2.1 and insignificant (p≈0.11). There is no evidence in favour of these behavioural changes translating into longer ROLs: the estimate is 0.069 more study programmes ranked when priority points are removed, and it is insignificant (p≈0.34). Students who fail in responding to the strategic incentives offered by PPM exist. During 2016 and 2017, 7–9 % of students submitted an ROL by which they could only be hurt, and in 2017, 2.8 % of students submitted an ROL which clearly demonstrates lack of strategic sophistication. Motivated by the result that students who make such mistakes exist, students who made a mistake are compared to those who didn’t. The results suggest that having more experience and lack of informational disadvantages don’t protect students from playing a strategy by which they can only be hurt, while these aspects seem to be negatively correlated with making a mistake that demonstrates lack of strategic sophistication. For both mistake types, making a mistake is associated with lower academic aptitudes. The finding that students’ behaviour is in line with some applicants strategically behaving under PPM has implications on whether true preferences should be inferred from stated preferences if stated under a manipulable mechanism. Furthermore, some students strategically behaving and some students failing in responding to the incentives can result in unfair allocations where some students justifiably envy others. In addition, factors such as luck, risk taking attitudes, confidence, and difficulties in predicting entrythresholds may contribute to who ends up being selected. Therefore, given the importance of college admissions on young students’ future prospects, how applicants respond to the incentives of the mechanism applied and how that in turn impacts the fairness of the resulting allocation of students to colleges remain questions which deserve more research.

(2022)Flash crashes are one of the most prominent market inefficiencies which are recognized in stock and index prices. They violate the hypothesis of efficient markets and affect the real economy as well. Their proper forecasting has not been possible with conventional methods due to their seeming rarity and extremity. Furthermore, they are difficult to detect from the noise of price processes. By augmenting the HAR model with companyspecific news data aim is to improve volatility estimates on days when these extreme events occur. These days are first identified from the price processes by a novel statistical method called Vstatistic, which detects statistically significant flash crashes. Data is every fulfilled trade for six stocks from New York Stock Exchange, and companyspecific news flow data which is obtained from RavenPack News Analytics service. Both data sets cover the years 2014 to 2016. HAR model is estimated for all six stocks with and without the news data and the insamplemodel estimates are compared both on the full data and on the days when flash crashes occur. Results are ambiguous but they give slight signs that news data could be useful for improving volatility estimates on the days when flash crashes occur. Model volatility estimates are better on average when augmented with news data. Mean absolute percentage error is 0.1% smaller on average across all entities when augmenting the model with news data. However, there are differences across companies on how much and if at all news data improves models' performance. In conclusion, further work is needed to verify the usefulness of news data in forecasting flash crashes.

(2022)Apteekit muodostavat oleellisen osan suomalaista lääkehuoltoa. Apteekkien tehtävänä on huolehtia lääkehuollon tehokkaasta ja turvallisesta järjestämisestä. Apteekkimarkkinan raskaan sääntelyn johdosta apteekeille muodostuu paikallisia monopoleja. Apteekkien ja apteekkareiden verotuksen avulla pyritään kattamaan lääkehuollon kustannuksia sekä saavuttamaan tulonjaollisia tavoitteita. Tämä tutkielma pyrkii selvittämään harjoittavatko apteekit verooptimointia ja millaisia taloudellisia vaikutuksia sillä on. Veroreaktioiden tutkimiseen käytetään usein verotuksen muutoksen luomaa luonnollista koeasetelmaa. Apteekkiverotuksessa ei ole tapahtunut merkittäviä muutoksia aineiston aikavälillä. Aineistona tutkielmassa käytetään FIMEAN apteekkien talousaineistoa vuosilta 20102018, yhdistettynä avoimesti saatavilla olevaan aineistoon apteekkien tiloissa toimivista erillisyhtiöistä. Apteekkien verooptimointia lähestytään tarkastelemalla kokonaisverotuksen luomia verokannusteita. Tyyliteltyjä verokäyttäytymismalleja verrataan apteekkien ja apteekkareiden toteutuneeseen käyttäytymiseen. Veroja optimoivan käytöksen sattumanvaraisuuden poissulkemiseksi käytetään logistista regressioanalyysiä. Tulosten perusteella apteekkareiden keskuudessa yleistyy systemaattinen verooptimointia erillisyhtiöiden kautta tapahtuvalla tulonmuunnolla. Ylimpään tulodesiiliin kuuluvat apteekkarit saavuttavat näin lähes 15 prosenttiyksikön veroedun. Verooptimoinnin todennäköisyyttä nostaa siirrettävissä olevat tulot sekä apteekkariin kohdistuva henkilöveroprosentti. Siirrettävien tulojen ylittäessä 200 tuhatta euroa ylittää erillisyhtiön todennäköisyys 50 prosenttia. Verotulojen menetys on noussut, kun maksettujen yhteisöverojen kasvu huomioidaan, noin 15 miljoonaan euroa vuodessa. Tulokset ovat linjassa pienyritysten verooptimoinnin empiirisen tutkimuskirjallisuuden kanssa. Aiheen jatkotutkimuksen kannalta olisi hyödyllistä yhdistää aineistoon veroaineisto henkilön tarkkuudella. Tarkastelu olisi mielenkiintoista laajentaa koskemaan kaikkia listaamattomia osakeyhtiöitä.

Heterogeneity in New Keynesian Models : Monetary Policy Implications from HANK and TANK Approaches (2023)This thesis explores the implications of Heterogeneous Agent New Keynesian (HANK) models for monetary policy by analyzing the existing literature and proposing a structural modification to a TwoAgent New Keynesian (TANK) model. The literature review offers an overview of the results of HANK models, starting from early contributions that first combined heterogeneity with nominal rigidities, revealing transmission channels of monetary policy that cannot be assessed with a representative agent framework. Subsequent studies build and use the HANK framework to examine these transmission channels more deeply, identifying the significant role of distributional effects in how monetary policy is transmitted to aggregate macroeconomic variables. The review also discusses the optimal monetary policy in HANK models, which focuses on minimizing idiosyncratic risk at the cost of inflation stability, and the role of HANK models in addressing the forward guidance puzzle. The thesis further examines TANK models as a simpler alternative to HANK models still being sufficient for capturing the effects of heterogeneity in New Keynesian models. By modifying a TANK model, this thesis aims to better align heterogeneity assumptions with empirical evidence on household types, particularly with the socalled wealthy handtomouth households. This modification leads to the identification of a new feedback loop channel where investments in physical capital amplify the responses of aggregate variables. However, a structural dilemma arises where calibrations cannot guarantee the desired nonRicardian response of consumption with a negative investment response. The thesis contributes to the understanding of the results and implications of different variations of HANK models for monetary policy, complementing existing theoretical discussions, and demonstrates the importance of heterogeneity assumptions in New Keynesian models.

(2020)This thesis attempts to examine how much a representative consumer per each country is willing to pay to avoid global warming by analysing their welfare gains from having a smoother consumption path. Temperature variations affect economic activity, and consumption is subject to shocks related to global warming. I start by reviewing the economic literature that studied the relationship between temperatures and economic activity. I highlight which are the main effects on the economy that are correlated to rising temperatures and I review the methods that are usually employed by economists to assess environmental damages. I then take a sample of 163 countries and compute the welfare gains for each country for having a smoother consumption path, following the method used by Lucas (2003). To do this, I use countrylevel household consumption data and I set values for the risk aversion coefficient following the suggestions of the previous economic literature. I repeat the experiment with a smaller sample of 72 countries, this time using countryspecific risk aversion coefficients retrieved from Gandelman and HernándezMurillo (2015). In both cases, I obtain that most of the countries have welfare gains lying in the order of 10^2 and 10^3. Using annual temperature data, I test the Spearman correlation coefficient between welfare gains and average temperatures. Although the previous literature stressed the adverse effects of global warming on the economy, I find no significant correlation between these two variables. Countries that are more at risk do not display higher welfare gains than countries with a lower risk of imminent climate damages. To explain my results, I then consider determinants of risk aversion other than temperature and conclude that risk aversion, and consequently the value of welfare gains, can depend on several other factors.
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