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2010 OECD Economic Surveys: Finland 2010

image of OECD Economic Surveys: Finland 2010

OECD's periodic survey of Finland's economy.  This 2010 edition includes chapters on overcoming the crisis, sustainable public finances, coping with the jobs crisis and preparing for ageing, and rising inequalities. It finds that the crisis hit Finland harder than most other OECD countries, worsening the fiscal outlook. This calls for a stronger fiscal framework.  Employment has held up relatively well, but rigidities in the labour market could complicate recovery. Increasing inequalities challenge Finland's social model and may be aggravated by the crisis.

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Rising inequalities challenge Finland's social model

Income distribution in Finland remains among the most equitable in the OECD, although, as in a number of other countries, disparities have widened considerably over the past decade. While the tax and transfer system has been effective in reducing income inequality, changes made to the income tax system in the early 1990s have contributed to rising disparities by encouraging income shifting among high earners. Disparities have also been increasing across regions, particularly in labour market outcomes. This reflects the dramatic structural change that has occurred since the early 1990s, and the lack of policy success in tackling this transition. These growing disparities in regional labour market outcomes have contributed to serious demographic imbalances building up in the regions. These are especially prevalent in the smaller municipalities and challenge the very sustainability of these entities. Misuse of the tax system by high income earners should be addressed, and regional labour market discrepancies should be tackled by increasing the flexibility of the labour force. This includes sharpening incentives for retraining that would promote sectoral and regional mobility. Sustainability of the municipalities system requires further rationalisation, including forced mergers.

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