--- title: "Beggar-Thy-Neighbor by Other Means" authors: - name: "Markkanen, Jaakko" url: "https://www.etla.fi/henkilot/markkanen-jaakko/" sameAs: - "https://orcid.org/0000-0002-4743-7790" - "https://scholar.google.com/citations?user=S810psIAAAAJ" - "https://x.com/JaakkoMarkkanen/" - "https://markkaj.github.io/" - name: "Siikanen, Markku" - name: "Valmari, Nelli" date_published: "2026-06-15" series: "ETLA Working Papers" series_number: "141" issn: - "2323-2420" - "2323-2439" jel_codes: - "F12" - "F14" - "L11" - "L13" - "L52" language: "en" publisher: "ETLA Economic Research" pdf_url: "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-141.pdf" keywords: - "International trade" - "Markups" - "Pass-through" - "Industrial policy" - "Internal devaluation" identifier: "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-141" abstract: "A country that cannot devalue its currency can still cut its exporters’ costs through industrial policy and steal business from foreign rivals. We call this beggar-thy-neighbor by other means and measure it for Finland’s 2017–2019 internal devaluation policy. We estimate the export demand for nine large manufacturing industries, together accounting for roughly 4 percent of Finnish GDP, using a BLP-style demand model and a sufficient-statistic identity for cost incidence. We document super-pass-through to export prices, averaging about 1.18, above the CES gravity ceiling. The realized policy cut labor costs by 3.6 percent and raised Finnish export revenue by €239.0 million over 2017–2020, 0.6 percent of baseline. A more ambitious original government proposal with 5 percent cost decrease would have shifted €567.8 million in revenue away from rival exporters in the same destinations. A hypothetical four-day work week would have cost €2.4 billion with wage costs rising 28 percent. Internal devaluation captures export-market share from foreign rivals. The cross-border revenue transfer is comparable in magnitude to the domestic gains." --- # Beggar-Thy-Neighbor by Other Means **Published:** 2026-06-15 **Categories:** Working Papers **URL:** https://www.etla.fi/sv/publikationer/working-papers-sv/beggar-thy-neighbor-by-other-means/ #### Abstract A country that cannot devalue its currency can still cut its exporters’ costs through industrial policy and steal business from foreign rivals. We call this beggar-thy-neighbor by other means and measure it for Finland’s 2017–2019 internal devaluation policy. We estimate the export demand for nine large manufacturing industries, together accounting for roughly 4 percent of Finnish GDP, using a BLP-style demand model and a sufficient-statistic identity for cost incidence. We document super-pass-through to export prices, averaging about 1.18, above the CES gravity ceiling. The realized policy cut labor costs by 3.6 percent and raised Finnish export revenue by €239.0 million over 2017–2020, 0.6 percent of baseline. A more ambitious original government proposal with 5 percent cost decrease would have shifted €567.8 million in revenue away from rival exporters in the same destinations. A hypothetical four-day work week would have cost €2.4 billion with wage costs rising 28 percent. Internal devaluation captures export-market share from foreign rivals. The cross-border revenue transfer is comparable in magnitude to the domestic gains. --- ## Additional Information 65348 **Kirjoittajat:** Markkanen, Jaakko - Siikanen, Markku - Valmari, Nelli **Publication Research:** No **Kansikuva:** https://www.etla.fi/wp-content/uploads/etla-working-papers-141-kansi.jpg **Lataa Pdf:** https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-141.pdf **Key Words:** International trade, Markups, Pass-through, Industrial policy, Internal devaluation **Jel:** F12, F14, L11, L13, L52 **Sivuja:** 62 **Kieli:** en **Paivays:** 15.06.2026 **Sarja Nro:** 141 **Sarja:** ETLA Working Papers **Issn:** 2323-2420, 2323-2439 (Pdf) **Saatavuus:** 2 ## Bibliographic metadata (JSON-LD) ```json { "@context": "https://schema.org", "@type": "ScholarlyArticle", "@id": "https://www.etla.fi/julkaisut/id/ETLA-Working-Papers-141", "headline": "Beggar-Thy-Neighbor by Other Means", "inLanguage": "en", "publisher": { "@type": "Organization", "name": "ETLA Economic Research", "url": "https://www.etla.fi", "logo": { "@type": "ImageObject", "url": "https://www.etla.fi/wp-content/uploads/logo-etla_logo.svg" } }, "datePublished": "2026-06-15T00:00:00+00:00", "author": [ { "@type": "Person", "name": "Markkanen, Jaakko", "url": "https://www.etla.fi/henkilot/markkanen-jaakko/", "sameAs": [ "https://orcid.org/0000-0002-4743-7790", "https://scholar.google.com/citations?user=S810psIAAAAJ", "https://x.com/JaakkoMarkkanen/", "https://markkaj.github.io/" ] }, { "@type": "Person", "name": "Siikanen, Markku" }, { "@type": "Person", "name": "Valmari, Nelli" } ], "abstract": "A country that cannot devalue its currency can still cut its exporters’ costs through industrial policy and steal business from foreign rivals. We call this beggar-thy-neighbor by other means and measure it for Finland’s 2017–2019 internal devaluation policy. We estimate the export demand for nine large manufacturing industries, together accounting for roughly 4 percent of Finnish GDP, using a BLP-style demand model and a sufficient-statistic identity for cost incidence. We document super-pass-through to export prices, averaging about 1.18, above the CES gravity ceiling. The realized policy cut labor costs by 3.6 percent and raised Finnish export revenue by €239.0 million over 2017–2020, 0.6 percent of baseline. A more ambitious original government proposal with 5 percent cost decrease would have shifted €567.8 million in revenue away from rival exporters in the same destinations. A hypothetical four-day work week would have cost €2.4 billion with wage costs rising 28 percent. Internal devaluation captures export-market share from foreign rivals. The cross-border revenue transfer is comparable in magnitude to the domestic gains.", "keywords": [ { "@type": "DefinedTerm", "name": "International trade", "@language": "en" }, { "@type": "DefinedTerm", "name": "Markups", "@language": "en" }, { "@type": "DefinedTerm", "name": "Pass-through", "@language": "en" }, { "@type": "DefinedTerm", "name": "Industrial policy", "@language": "en" }, { "@type": "DefinedTerm", "name": "Internal devaluation", "@language": "en" } ], "isPartOf": { "@type": "PublicationIssue", "issueNumber": "141", "isPartOf": { "@type": "Periodical", "name": "ETLA Working Papers", "issn": [ "2323-2420", "2323-2439" ] } }, "mainEntityOfPage": "https://www.etla.fi/sv/publikationer/working-papers-sv/beggar-thy-neighbor-by-other-means/", "url": "https://www.etla.fi/sv/publikationer/working-papers-sv/beggar-thy-neighbor-by-other-means/", "associatedMedia": { "@type": "MediaObject", "@id": "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-141.pdf", "encodingFormat": "application/pdf", "contentUrl": "https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-141.pdf" }, "sameAs": [ "https://www.etla.fi/julkaisut/working-papers/beggar-thy-neighbor-by-other-means/", "https://www.etla.fi/en/publications/working-papers-en/beggar-thy-neighbor-by-other-means/", "https://www.etla.fi/sv/publikationer/working-papers-sv/beggar-thy-neighbor-by-other-means/" ] } ```