Markus J#228;ntti Juho Saari Juhana Vartiainen November 2005.pdf

Growth and equity in Finland1 Markus Jäntti2 Juho Saari3 Juhana Vartiainen4 November 2005 1The authors would like to thank Jan Otto Andersson, Max von Bonsdorff, Juhani Koponen, Jukka Pekkari- nen, Matti Pohjola, Tony Shorrocks, Laura Torvinen, Timo Voipio and Michael Walton and for helpful sug- gestions and comments. Taina Iduozee provided invaluable bibliographical support. This paper was prepared as a background paper for the World Development Report 2006. 2Åbo Akademi University, Turku and WIDER, Helsinki 3University of Turku 4 Trade Union Institute for Economic Research, Stockholm Abstract This paper reviews Finnish economic history during the “long” 20th century with a special emphasis on policies for equity and growth. We argue that Finland developed from a poor, vulnerable and conflict-prone country to a modern economy in part through policies geared at both growth and equity, such as land reform and compulsory schooling. The state participated in economic activity both indirectly and directly in the post-war period, implementing many social policy reforms that facilitated the functioning of the labour market and led to greater equity. Centralised collective bargaining was just one of the many means through which central government intervened in the economy. Both the long-run growth record and the equality of different kinds of economic outcomes are fairly positive. This suggests that facilitating economic growth through such policies that further more equitable outcomes may at least in the case of Finland have met with some success. JEL Codes: J50, N33, N34, O52 1 Introduction This paper presents a brief socio-economic history of Finland from the 1860s to the present. In particular, we are interested in examining the