Umeå Economic Studies,
Umeå University, Department of Economics

Abstract: This thesis consists of four self-contained papers on job turnover, productivity and state-local finance.

Paper [I] deals with the determinants of the rate of job turnover defined as the change in distribution of employment between and within industries in Swedish manufacturing. The rate of inter-industry job turnover is driven by the dispersion of profit changes among industries. Shifts in international competitiveness among industries seem to play a central role in the explanation of this pattern. The rate of intra-industry job turnover has been higher in industries with many small plants, low profit margins and high import penetration.

Paper [II] analyzes the impact of openness on total factor productivity (TFP) growth. Using Swedish industry level data the results show that economically integrated industries tend to be more engaged in research and development (R\&D) and have more entry and exit activity than other industries. The domestic R\&D intensity does not contribute to the TFP growth rate. Instead, the results imply that openness to international markets, which helps facilitate technology spillovers, has a significant impact on the growth rate. There is also some evidence suggesting that producers exiting the market are less productive, implying that such exits will increase the average productivity of the industry concerned.

Paper [III] is to design and implement a test of whether the external effect from tax base sharing among local and regional governments is internalized via the intergovernmental transfer system. The test is based on the observation that if the external effect is internalized, an increase in the income tax rate at one level of government will induce the other level to reduce its income tax rate by the corresponding amount, leaving the effective tax rate unchanged. By using panel data for the Swedish local and regional public sectors, we estimate the reaction function for the local income tax rate. The results imply that an increase in the regional income tax rate induces the municipalities in the region to decrease their income tax rates. In addition, we are able to reject the null hypothesis that the external effect from tax base sharing is internalized.

Paper [IV] concerns risk-sharing, in terms of how the central government smooths personal income among municipalities via the tax and transfer systems. Using Swedish panel data, the results show that the national tax and transfer systems mitigate an adverse shock to income of one krona so that disposable income falls by 67 öre, on average. However, there are large differences across regions, where the effect on disposable income varies between 32 and 78 öre in the krona.

Keywords: risk-sharing; intergovernmental transfers; international competition; job turnover; local and regional governments; openness; R&D; spillover; structural change; taxes; TFP growth; vertical external effects

JEL-codes: D62; F10; H11; H21; H23; H77; J63; O30; O32

22 pages, April 25, 2002

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