Understanding regional productivity in a Nordic welfare state: Does ICT matter?

The study is about the determination of regional productivity in a Nordic welfare state, more particularly in Finland. Regional labour productivity is related to industry structure, demographic factors and the variables that capture the reorganization of labour markets. The data covers 85 Finnish regions over the period of 1989-1997. Industry structure is an important determinant of labour productivity in the Finnish regions. In particular, the emerging new economy in terms of ICT manufacturing yields an increase in labour productivity measured by the value-added divided by the total hours of work of the regions, but the positive impact of ICT manufacturing is tightly limited to its direct contribution. The share of ICT services has no impact on the level of labour productivity across the Finnish regions. In contrast to the U.S. and European stylized features, there is no evidence for the view that when the density of economic activity increases (measured by the number of employees divided by surface area), the labour productivity of the Finnish regions rises. In addition, restructuring at the plant level of the regions is not directly related to the evolution of labour productivity based on the evidence. – Finland ; regional labour markets ; productivity