The Efficiency of Fiscal Measures in Preventing Out Migration from North Finland

• Published in: Regional Studies
• Language: English
• Published: Taylor & Francis 2011
• Subjects: Social Sciences & Humanities; Norway; Kainuu; North Finland; Lappi
• Online Access: http://hdl.handle.net/2262/55088; https://doi.org/10.1080/00343400802508786

Abstract In this paper we introduce a computable general equilibrium (CGE) model for the Finnish regional economy, RegFin. This multi-sector and interregional model characterizes economic activity in the regions of Lappi, Pohjois-Pohjanmaa, Kainuu, Keski-Pohjanmaa and the rest of Finland. Unemployment and net migration are determined endogenously within the model. We consider the macroeconomic effects of a regional policy applied to North Finland that is similar to tax reforms which have been implemented in Norway. The key feature of the policy concerns regionally differentiated tax rates. Tax incentives affect individual choices regarding both migration and employment. We also study a value-added tax reform where labour costs are exempted from the tax base. Our simulations seem to indicate that the regional differentiation of the social security payments of the employers and the value-added tax reform could be effective tools of regional policy. [e-mail] (Torma, Hannu Kalevi) [e-mail] (Rutherford, Thomas) University of Helsinki, Institute for Rural Research & Training - 60320 Sinajoki - FINLAND (Torma, Hannu Kalevi) University of Colorado at Boulder - Boulder - UNITED STATES (Rutherford, Thomas) FINLAND UNITED STATES