Hannu Tervo

Effects of Unemployment on New Firm Formation: Micro-Level Panel Data Evidence from Finland

This paper aims to provide a comprehensive insight into the role that unemployment plays in influencing new firm formation. Panel data models and micro-level data are used to help achieve this objective. We endeavour to identify simultaneously the separate effects of personal, regional and national unemployment on new firm formation in Finland for the period 1987–1995. The results indicate considerable evidence for a positive and non-linear effect of personal unemployment on the likelihood of an individual to become an entrepreneur. The findings also indicate that the economic situation has an effect on firm formation: times of low unemployment and business prosperity favour entrepreneurship. On the other hand, the analysis gives no clear evidence of the regional unemployment situation affecting the likelihood of founding a business.

Regional unemployment, self-employment and family background

This paper analyses the role of regional unemployment on self-employment. The paper argues that family background separates individuals with respect to the effect of unemployment. The empirical analysis is based on data on a sample of Finnish residents aged 0–14 years in 1970 whose subsequent employment is examined. The results show that high unemployment in a region pushes individuals from self-employed families into self-employment, while it has the opposite effect on individuals from wage earner families. The push effect seems to work only among those individuals who already have entrepreneurial skills through their family background.

Migration of the Highly Educated: Evidence from Residence Spells of University Graduates

We examine the inter-regional migration of university graduates from 1991 to 2003 in Finland. The results show that time matters: two-years before and during the graduation year the hazard rates of migration increase, and then decrease thereafter. Although university graduates are particularly mobile, we find that most of them do not move from their region of studies within 10 years after graduation. The out-migration, i.e., brain drain, is much higher among graduates in the more peripheral universities than in the growth centers (Helsinki in particular). Migration is also substantially more likely for those studying away from the home region than for those studying at home.

Regional Policy Lessons from Finland

The Finnish economy and society has long been dominated by primary production. Post-war economic development was rapid and welfare gaps between the much more developed economies and Finland narrowed and were even partly reversed. Rapid economic expansion together with structural change has had the effect of centralizing both economic activity and population. The trend has been towards the southern and central regions where the metropolitan area of Helsinki and most of the other larger towns and urban centres are located. Together with vigorous technological progress in agriculture and forestry the rapid urbanization and industrialization of the 1960s and 1970s the fastest in Europe altered the status of the primary industries, creating enormous challenges for regional policymaking. Early regional policy based on building up infrastructure, decentralization of manufacturing industries and the creation of a welfare state was fairly successful, although it could not prevent huge out-migration from rural areas in the 1960s and early 1970s. While regional development was fairly even in the 1970s and 1980s, the 1990s were a time of great economic flux and drastic structural change. Finland was hit by a severe recession in 1991-93 and both production and employment fell sharply. Rapid economic recovery was based on export and knowledge-based industries. The investment in know-how turned out to be successful: several parallel analyses of international competitiveness show that Finland was one of the most dynamic and competitive economies in the world in the late 1990s and early 2000s. Although Finland as a whole flourished in the late 1990s, this was not true across all its regions. The positive aggregate development experienced by Finland was based on uneven regional growth, especially after the severe recession of the early 1990s. Regional competitiveness varied greatly, the most competitive regions being those containing an urban centre and especially those with a university (Huovari et al. 2001). Migration into the major centres of population accelerated in the late 1990s, and many of the smaller urban areas even saw a net loss in population. In recent

Spatial variations in intergenerational transmission of self-employment

Niittykangas H. and Tervo H. (2005) Spatial variations in intergenerational transmission of self‐employment, Regional Studies 39 , 319–332. Intergenerational transfers of human and non‐human capital may motivate children to follow their self‐employed parent. This paper analyses occupational inheritance among self‐employed families in Finland. Longitudinal micro data from 1970–99 are exploited. The sample consists of children aged 0–14 years in 1970. The results show that having an entrepreneurial family background strengthens the probability of entering self‐employment. The results confirm the notion of the importance of the local environment for self‐employment. They also offer some evidence for the hypothesis that intergenerational transmission of self‐employment is an explanation for spatial differences in self‐employment.

Air transportation and regional growth: which way does the causality run?

While there is typically a strong correlation between air traffic and economic growth, the direction of causation between the two is not clear. To address the existence of causality in this paper we consider the nature of this relationship in different types of regions. The empirical analysis is based on European-level annual data from eighty-six regions and thirteen countries on air traffic and regional economic performance in the period 1991 to 2010. Granger noncausality analysis in a panel framework, which allows possible heterogeneity between regions, was used. The results suggest that the causality processes are homogenous from regional growth to air traffic. There is causality from air traffic to regional growth in peripheral regions, but this causality is less evident in core regions. Thus, air transportation plays a crucial role in boosting development in remote regions. There might, therefore, be a case for subsidizing local airports in these regions.

Self-employment transitions and alternation in Finnish rural and urban labour markets*

This paper deals with the transitions and alternation between self-employment, paid-employment and non-employment in Finland in 1987-1999, paying special attention to differences in self-employment dynamics between areas characterized by different labour market conditions, viz. rural and urban locations. Markovian analysis reveals significant differences by the type of area in the processes of transition between the three labour market states. Alternation between self-employment and other labour markets states turns out to be greater in rural than urban areas. Five major types of alternating working careers are identified. The type of area is importantly related to alternating working careers even when all the important variables describing personal and family characteristics are included in the models. Copyright (c) 2007 the author(s).

Who Moves to Depressed Regions? An Analysis of Migration Streams in Finland in the 1990s

Depressed regions typically lose a large number of migrants but simultaneously are destination regions for some migrants. This study analyzes those people who decided to move to depressed regions in Finland in 1993-1996. The analysis is based on a 1 percent sample drawn from the Finnish longitudinal census. The results show that migration into depressed regions is also a selective process. Return migration is only one part of this migration. However, the more educated an individual is, the more likely she or he is to move to a flourishing region. The process of concentration of human capital is reinforced by interregional migration.

The nature of self-employment: how does gender matter?

This paper analyses female and male entrepreneurship and the differences between them in Finland. The female self-employment rate is clearly lower than that of male self-employment in Finland. The paper shows that differing behaviour accounts for differing rates of self-employment between females and males. The predicted earnings differential between self-employment and paid employment has a divergent effect on the probabilities of self-employment. For males, it is positive (as expected). For females, it has no effect, which accentuates the other motives they have for self-employment. Both spouse and family are found to have bigger effects on female self-employment than on male self-employment. Yet, personal characteristics are behind entrepreneurship for both sexes. Regional characteristics are more important for male than female self-employment. The analysis is based on a structural probit model and a large register-based data set representing a 7% random sample of all Finns in 2001.

Post-Migratory Employment Prospects: Evidence from Finland

This paper analyses the role which migration plays in improving post-migratory employment prospects of migrants (long-distance) within Finland, by examining the employment status of migrants and non-migrants at the end of the migration interval. The analysis is based on micro data from the period 1985-90. The results from multivariate analyses suggest that migration by itself has not augmented the likelihood of getting a job, even though tabular comparisons of re-employment rates between migrants and non-migrants suggest this to be the case. Migration, however, has an indirect role in enhancing job search outcomes as it moves workers to labour markets characterized by more favourable employment opportunities. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 2000.