Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212030
Authors: 
Kilponen, Juha
Ripatti, Antti
Year of Publication: 
2006
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 5/2006
Abstract: 
Using the DGE model of the Finnish Economy (the 'Aino' model), we study the response of the economy to reforms in both labour and product markets.The reforms are two-fold.We assume that the wage mark-up, ie the monopoly power of wage-setters is gradually reduced by 5 percentage points.At the same time, the degree of competition is increased, ie price margins are exogenously reduced by 2 percentage points.These reforms imply a very favourable outcome of the economy.Both consumption and employment increases permanently and the reforms are welfare enhancing.Public balances improve giving room for 1.5 percentage point cut in income taxes.Our simulation exercises clearly demonstrate that such reforms may help in financing the future fiscal burden of an ageing population.
Subjects: 
competition
dynamic general equilibrium
public finance
JEL: 
E60
C68
Persistent Identifier of the first edition: 
ISBN: 
952-462-265-3
Document Type: 
Working Paper

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