Structural Change of the Finnish Economy – a Systems Approach

The research initiative aims at increasing the systemic understanding about the impact of global trends and unforeseeable shocks on the Finnish national economy and regional economies as well as producing science-based tools for practical policy planning, which will support sustainable regional growth in the volatile global environment; such planning that minimizes the need for the special corrective actions in the future and that maximizes the sustainability of regions.

Overview

The typical annual GDP growth rate (on average 2.7% in 1975-2010) may not be reachable due the asymmetric development of the global economic system; simultaneously some of the traditionally strong exporting industries (such as forest and electronics industries) are focusing their investments on abroad. The new growing sectors such as the IT sector and various components of the service sector have not shown to be able to replace the loss of exports of the manufacturing sectors. Besides, regions abandoned by large employers do not become attractive sites for the new service industries. Decision makers are facing tough decisions; hence they need better understanding on the dynamics of the transition phase as well as science-based tools for supporting decisions.

IIASA Research

Economic network representing intermediate good flows between economic sectors  export and import flows for three Finnish regions – Pori, Joensuu and Oulu are studied. It is found that in all three regions the most effective policy intervention to stimulate local production is increasing the state subsidies to unemployed and the state demand.

Three approaches are used to model ecomony of the regions: network analysis, multipliers and agent-based modeling.

Dream Valley simulator (DV) is an agent-based model of a regional development covering several features, such as heterogeneity and bounded rationality of agents, stochasticity in implementing the decisions, interactions of agents and their adaptation and learning. Agents are individuals, companies and the government acting in the physical environment.  Using the Dream Valley simulator allows for experimenting different policy options and their impact on the regional economics and its population, in other words the Dream Valley simulator is an artificial laboratory for experimenting with regional economies The region specific customized Dream Valley will be validated by historical data and expert estimatesIt tests the vulnerability of the regions to a number of shock scenarios where economic shocks are exogenous to the regions. 

A policy report to the Ministry of Employment and Economy summarizes policy recommendations; three papers presenting the models, simulation results and conclusions are being prepared.


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Last edited: 07 November 2016

CONTACT DETAILS

Elena Rovenskaya

Program Director

Advanced Systems Analysis

T +43(0) 2236 807 608

CONTACT DETAILS

Leena Ilmola-Sheppard

Senior Research Scholar

Advanced Systems Analysis

T +43(0) 2236 807 614

CONTACT DETAILS

Nikita Strelkovskii

Research Scholar

Advanced Systems Analysis

T +43(0) 2236 807 653

Timeframe

2012 - 2013

International Institute for Applied Systems Analysis (IIASA)
Schlossplatz 1, A-2361 Laxenburg, Austria
Phone: (+43 2236) 807 0 Fax:(+43 2236) 71 313