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(2008) Competition and Product Cycles with Non-Diversifiable Risk. Journal of Economics 94: 1-30.

Abstract. This paper analyzes the growth effects of competition in a product-cycle model where R&D firms both innovate and imitate and households are subject to non-diversifiable risk. I prove that product market competition promotes growth when the initial level of competition is high enough. In contrast to the earlier product-cycle models with diversifiable risk, I show also the following. Some positive profits are necessary for technological change. The larger the proportion of industries subject to price competition, the slower economic growth.

Accepted for publication in Journal of Economics.
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(2008) International Emission Policy with Poisson Technological Change. Published in “Evolutionary and Deterministic Methods for Design, Optimization and Control”, edited by P. Neittaanmäki, J. Periaux and T. Tuovinen. Barcelona: International Centre of Numerical Methods in Engineering (CIMNE).

P. Neittaanmäki, J. Periaux and T. Tuovinen (editors):    Evolutionary and Deterministic Methods for Design, Optimization and Control.    Barcelona: International Centre of Numerical Methods in Engineering (CIMNE).   ISBN: 978-84-96736-45-0

Pages 430-438:  Tapio Palokangas, “International Emission Policy with Poisson Tehcnological Change.”

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(2007) Employment Cycles in a Growth Model of Creative Destruction. Published in "Stochastic Economic Dynamics", edited by B.S. Jensen and T. Palokangas. CBS Press 2007.

Abstract. I construct a model of Schumpeterian growth with cycles for an economy with efficiency wages in R&D and wage bargaining in production. I show that the economy generates cycles in which capital, output and employment vary in fixed proportions. Capital accumulates until a new technology is introduced, at which moment employment falls sharply due to obsolescence of capital. While employment varies counter-cyclically, wages grow on the average in proportion to the level of productivity.

Published in “Stochastic Economic Dynamics”, edited by B.S. Jensen and T. Palokangas. CBS Press 2007. Homepage

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(2007) Stochastic Economic Dynamics. A book published by CBS Press, 438 pages. Edited by B.S. Jensen and T. Palokangas.

Abstract. This book analyzes stochastic dynamic systems across a broad spectrum of economics and finance. The major unifying theme is a coherent and rigorous treatment of uncertainty and its implications for describing stochastic processes by the stochastic differential equations of fundamental models. The book consists of three parts: 1. Developments in Stochastic Dynamics; 2. Stochastic Dynamics in Basic Economic Growth Models; 3. Intertemporal Optimization in Consumption, Finance and Growth. This authoritative collection is an important resource for scholars in this vital area of economic research.

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(2007) Immaterial Property Rights, Product Cycles and Non-Diversifiable Risk. Discussion Paper No. 631. Department of Economics. University of Helsinki.

Abstract. In this study, I examine immaterial property rights in an economy where R&D firms innovate and imitate and households face non-diversifiable risk. Some property rights postpone the expected time an innovation will be imitated (e.g. increase the “length” of an innovation), while the others protect the imitator’s profits after a successful imitation (i.e. increase the “width” of an innovation). The main findings are as follows. Property rights that generate “short” and “wide” innovations also speed up economic growth. The smaller the households’ rate of risk aversion, the “longer” and “narrower” the welfare-maximizing innovations.
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(2007) Trade, Status, Population Growth, and Environment in Developing Countries. Discussion Paper No. 629. Department of Economics. University of Helsinki. (Co-authored with Ulla Lehmijoki)

Abstract. This paper examines per capita pollution in a developing economy by a family-optimization model where fertility is endogenous and wealth increases welfare through status effect. Developing countries have weaker environmental laws and specialize in capital-intensive “dirty” goods. With a significant status effect, gains from trade stimulate investments leading to higher wages so that population growth first increases but then decreases. The opposite changes in labor supply first swell but then curb the production of the capital-intensive dirty good. A typical EKC path appears: per capita pollution increase at the earlier but decrease at the later stages of development.
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(2006) Political Instability, Gender Discrimination, and Population Growth in Developing Countries. Journal of Population Economics 19: 431 – 446. (Co-authored with Ulla Lehmijoki)

Abstract. This paper introduces gender discrimination and population growth into a model of political economy. It is assumed that households are family dynasties and the government keeps up the army for the case of political instability in the country. It is shown that there are economic limits to conscription from young men. Therefore, to ensure the sufficient supply of the men in the conscription age,the government boosts population growth though hampering the participation of women in production. Some
empirical evidence on the interdependence of political instability and population growth is provided. DOWNLOAD

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(2006) Optimal Capital Taxation with Labor Unions. Interim Report IR-06-028. International Institute for Applied Systems Analysis, Laxenburg, Austria

Abstract. In this paper, I examine the nature of optimal capital taxation in an economy where labor unions set wages. Wage contracts are called binding, if they protect investors against immediate expropriation after new machines are installed. I show that in order to maintain aggregate production efficiency the government needs a labor tax only in the presence and taxes on both labor and capital in the absence of binding contracts. In addition,I construct optimal tax rules for the cases of both binding and non-binding wage contracts. Download

  • A preliminary version of this paper was presented in the 16th Annual Conference of the European Association of Labour Economics (EALE), Lisbon, September 9-11, 2004. Homepage
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(2005) Economic Integration, Market Power and Technological Change. IZA Discussion Paper No. 1592. IZA, Germany.

Abstract. We examine a common market which expands by integrating new regions. Capitalists are strategically
interdependent through the goods market and they improve their productivity through R&D. Production and R&D employ unionized workers. The purpose of integration is to maximize a weighed
average of workers’ and capitalists’ utilities. The main findings are as follows. Integration benefits capitalists more than workers. If labour unions are strong enough, then the common market
can expand indefinitely. Otherwise, there is a upper limit for integration. This is the higher, the higher producer market power or the stronger the capitalists’ political influence.

  • A paper presented in the Ninth International Conference on Dynamics, Growth, and International Trade (DEGIT), Reykjavik, Iceland, June 11-12, 2004. Homepage
  • A paper presented in IZA, Germany, September 7, 2004.
  • A paper presented in the international Europaeum workshop on “Factors, Goods, Externalities, Institutions, and Mobility in Europe and Beyond”, Bologna, Italy, September 30 – October 1, 2005.
  • A paper presented in the Tokyotech/IIASA Workshop in Laxenburg, Austria, September 8-9, 2007

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