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Public finance and economic policy research focuses on structural issues of taxation and financing of social security. Long-term options of economic policy are studied especially with the ageing of population as the point of departure. The emphasis is on the uncertainty and risks that are inherent in economic development and demographic change. Policy analysis focuses on the sustainability of public finances and construction and assessment of related strategies.
The programme’s objects of interest are related to accumulation of wealth and saving behaviour, funding of pensions and other social security systems, taxation with its impact on economic incentives, inter-generational income distribution, and public debt. Additionally, the role and significance of private insurance in relation to social security is an important subject of research.
A general equilibrium simulation model is applied in a number of research projects to describe an economy that contains elements of uncertainty. The model is based on assumptions and observations of households’ and firms’ behaviour, which are influenced by income redistribution and taxation system. When assessing a policy’s quality, the degree of risk control is applied as a criterion in addition to expected improvement in people’s welfare.
Analysis of cyclical issues is combined with long-term sustainability studies. An example of objects of interest is how tightness of fiscal policy can be measured.
Dr. Tarmo Valkonen is research director, Dr. Jukka Lassila research advisor and Ph. D. Niku Määttänen research instructor of the public finance and economic policy research programme.
