Competitiveness and employment in Finland

Abstract

There are a variety of theoretical models for small open economies which emphasize supply side adjustments and the infinite elasticity of supply and demand abroad. Accordingly, the lack of world demand cannot be the permanent cause of unemployment. However, while there is also a nontraded sector, domestic demand has to be taken into account. Although the target levels are difficult to define, there are some reasons for arguing that, on the average, the Finnish economy has experienced high unemployment (compared to the structure of labour market) and an excess deficit in foreign trade.