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ETLA Raportit ETLA Reports 27 March 2014 No 21 Openness, Specialisation and Vulnerability of the Nordic Countries Ville Kaitila* – Tuomo Virkola** * ** ETLA – The Research Institute of the Finnish Economy, [email protected] ETLA – The Research Institute of the Finnish Economy, [email protected] Suggested citation: Kaitila, Ville & Virkola, Tuomo (27.3.2014). “Openness, Specialisation and Vulnerability of the Nordic Countries”. ETLA Reports No 21. http://pub.etla.fi/ETLA-Raportit-Reports-21.pdf We thank the Nordic Council of Ministers for funding this research paper. We thank Markku Kotilainen and Vesa Vihriälä for helpful comments. Any errors are our own. ISSN-L2323-2447 ISSN 2323-2447 (print) ISSN 2323-2455 (online) Contents Abstract 2 Tiivistelmä2 1Introduction 3 2Openness 2.1Trade 2.2 Foreign Direct Investment 2.3 Multinational enterprises 4 4 6 7 3Specialisation 3.1Exports 3.2 Revealed Comparative Advantage 3.3 Value added exports 10 10 14 15 4Vulnerability 4.1 Terms of trade 4.2Specialisation 4.3 Exporting Enterprises 19 19 21 21 5Conclusions 23 References Appendix 24 25 Openness, Specialisation and Vulnerability of the Nordic Countries Abstract In this paper we analyse to what extent the Nordic economies are vulnerable to external shocks. Specifically, we assess the conventional wisdom that the Nordic countries are small open economies that are significantly engaged in international trade, specialised in only few specific industries and, as a consequence, extremely dependent on the competiveness of their tradable sector and exposed to external shocks. To study this conventional wisdom, we employ a comprehensive set of indicators about trade openness, specialisation and vulnerability. While we do find that the Nordic countries are open economies, though not to an exceptional degree, we also find significant heterogeneity across these countries with respect to their vulnerability. Key words: International trade, small open economy, Nordic countries, specialisation, vulnerability JEL: F14, F6, L00 Pohjoismaiden avoimuus, erikoistuminen ja shokkiherkkyys Tiivistelmä Tässä tutkimuksessa tarkastellaan Pohjoismaiden alttiutta ulkoisille taloudellisille shokeille. Arvioimme vakiintunutta käsitystä, että Pohjoismaat ovat pieniä ulkomaankaupasta riippuvaisia avotalouksia, jotka ovat erikoistuneet vain harvoihin toimialoihin. Tämän seurauksena ne ovat hyvin riippuvaisia avoimen sektorinsa kilpailukyvystä ja alttiita ulkoisille shokeille. Analyysissa käytetään laajaa tilastomateriaalia ulkomaankaupan avoimuudesta, erikoistumisesta ja herkkyydestä. Tulosten mukaan Pohjoismaat ovat avoimia talouksia, joskaan eivät poikkeuksellisen avoimia. Maiden välillä on lisäksi huomattavia eroja shokkiherkkyyden suhteen. Asiasanat: Kansainvälinen kauppa, pieni avotalous, Pohjoismaat, erikoistuminen, shokkiherkkyys JEL: F14, F6, L00 Openness, Specialisation and Vulnerability of the Nordic Countries 3 1Introduction It is often argued that the Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are particularly vulnerable to external shocks and very dependent on the competiveness of their tradable sector. This argument is based on the conventional wisdom that the Nordic countries are small open economies that are specialised in just a few selected industries. Yet the recent economic and financial crisis has had heterogeneous effects on economic activity in the Nordic countries. Iceland and Finland were hit hardest, while Norway escaped with very little damage. In this paper we aim to assess to what extent the conventional wisdom holds true. In particular, we employ a comprehensive set of indicators to analyse the openness and vulnerability of the Nordic economies to external shocks. We study foreign trade, export structure, foreign direct investment (FDI) and cross-border activities of multinational enterprises (MNEs). We note that traditional measures, based on gross trade figures, potentially mislead any interpretation of openness and the significance of international trade as they fail to acknowledge the nature of global value chains, where the production of export goods is increasingly geographically fragmented. In addition, we motivate that we need a heterogeneous set of indicators in order to evaluate vulnerability. Our analysis first suggests that the Nordic countries are indeed open economies. This is supported by the significant share of value added that is created in their tradable sector. However, they are not significantly more open than comparable small economies in Europe, or even Germany which is a much larger economy. Second, we find that there is significant heterogeneity among the five countries in terms of specialisation. In particular, Iceland and Norway are extremely concentrated in producing and exporting a few goods (in particular fish, oil, natural gas and aluminium), but Finland, Sweden and especially Denmark, have a much more diversified export structure, which brings significant value added to the domestic economy. Third, we find that there exists heterogeneity in the extent that the Nordic countries are sensitive to external shocks. This is, among others, due to their differences in their terms of trade volatility and varying concentration of exports to a few exporting firms and products. Previous studies suggest that Nordic economies are particularly vulnerable to external shocks due to their trade linkages and financial openness. For example, Vitek (2013) studies the influence of external macroeconomic and financial shocks to Nordic economies in a structural macro model and suggests that most of the cyclical output variation is driven by external factors. Similarly, Gulan et al. (2013) attribute most of the fall in Finnish economic activity during the recent economic and financial crisis to a lack of external demand and external financial stress. However, this literature which relies on historical decompositions of macroeconomic fluctuations, does not address the potential structural factors (industrial and export products) that impose risks on economic activity in the future and that may vary significantly across countries. We aim to complement this literature. The rest of this paper is constructed as follows. Section 2 discusses the openness of Nordic economies based on various indicators, including international trade, foreign direct investment and the significance of multinational enterprises. Section 3 presents indicators on specialisation. Section 4 discusses vulnerability and exposure to external shocks. Section 5 concludes. 4 3 ETLA Raportit – ETLA Reports No 21 In this section, we first study the openness of the Nordic economies in terms of international trade. 2Openness Second, we look at foreign direct investment statistics. Finally, we discuss openness in terms of multinational enterprises and their role in domestic economic activity. During our analysis, we keep In this section, we first study the openness of the Nordic economies in terms of internationGermany alastrade. a reference whenever meaningful. helpsFinally, us to understand the particular Second, country we look at foreign direct investmentThis statistics. we discuss openness characteristics of Nordic countries in contrast a large open economy. in terms of multinational enterprises andtotheir role but in domestic economic activity. During our analysis, we keep Germany as a reference country whenever meaningful. This helps us to Tradecountries in contrast to a large but open understand the particular characteristics 2.1 of Nordic economy. A common measure of a country’s openness is the sum of the value of its exports and imports divided by its gross domestic product, or trade openness in short. It is a measure of inter2.1Trade connectedness and reflects the importance of both exports and imports for the domestic economy. Figure 1 shows trademeasure openness in the Nordic countries andofin number other and OECD economies A common of a country’s openness is the sum thea value of itsofexports imports 2 for comparison. consistent with or thetrade conventional the Nordic countries are divided byItitsshows, gross domestic product, openness inwisdom, short. It isthat a measure of inter-connectedness and reflects the importance of both exports and imports for the domestic economore engaged in international trade than the United States or most of the large economies in the my. Figure 1 shows trade openness in the Nordic countries and in a number of other OECD euro area. The combined ratio of 1imports and exports is between 68 per cent of GDP in Norway and economies for comparison. It shows, consistent with the conventional wisdom, that the Nor97 per cent GDP inare Iceland. Yet, thein figure also suggests that Nordic countries arethe not dicofcountries more engaged international trade than thethe United States or most of particularly open when compared to other small economies. For instance, trade comprises large economies in the euro area. The combined ratio of imports and exports is between 68 pera much cent of GDP in Norway and 97 per cent of GDP in Iceland. Yet, the figure also suggests that Trade larger share of economic activity in countries such as the Netherlands, Belgium and Ireland. the Nordic countries are not particularly open when compared to other small economies. For openness in Germany also exceeds that of Finland and Norway, even though it is a much larger instance, trade comprises a much larger share of economic activity in countries such as the economy.Netherlands, Belgium and Ireland. Trade openness in Germany also exceeds that of Finland and Norway, even though it is a much larger economy. Figure 1 Trade in goods and services, % of GDP, 2009 % of GDP, 2009 Figure 1: Trade in goods and services, % 200 150 100 50 0 Note: Trade is measured as gross imports plus gross exports. *EA12 is an arithmetic average for the Euro Area. Note: TradeSource: is measured as gross imports plus gross exports. *EA12 is an arithmetic average for the Euro Area. OECD. Source: OECD. 1 For consistency we choose to present our figures for 2009. While 2009 was a year associated with significant turbulence in international trade, it does not affect the ranking of countries to any significant degree. However, we cannot draw too strong conclusions about each country solely on the basis of its trade openness. In particular, gross trade figures do not include information on the domestic value added 2 For consistency we choose to present our figures for 2009. While 2009 was a year associated with significant turbulence in international trade, it does not affect the ranking of countries to any significant degree. Openness, Specialisation and Vulnerability of the Nordic Countries 5 However, we cannot draw too strong conclusions about each country solely on the basis of its trade openness. In particular, gross trade figures do not include information on the domestic value added content in exports. In reality,4domestic enterprises use imports as inputs in the production of their export products, but they are also used in re-exports thus inflating the trade figures. Consequently, gross trade data may bias any interpretation about each country’s the importance of international for the domestic economy and, as a con-of their content inopenness exports.and In reality, domestic enterprises trade use imports as inputs in the production sequence, the vulnerability of the domestic economy to external shocks. export products, but they are also used in re-exports thus inflating the trade figures. Consequently, gross tradeOne data may bias any interpretation about each country’s openness and the importance of way around this problem is to look at the value added trade figures, which abstract from international trade for the domestic economy as a consequence, the vulnerability of rethe the foreign intermediate inputs employedand, in producing domestic exports, as suggested by 2 cent literature. Figure 2shocks. shows the domestic value added embodied in foreign final demand domestic economy to external or, in other words, the value added exports as estimated by the OECD. We find that exports account forthis between 24 percent and 35atper of domestic value added in the Nordic countries, One way around problem is to look thecent value added trade figures, which abstract from the implying that trade does contribute significantly to domestic value added. The Nordic counforeign intermediate inputs employed in producing domestic exports, as suggested by recent tries fall between large economies, such as the United States and France where international Figure 2 shows added embodied in foreign finalsuch demand or, in other literature.3trade accounts for 9 the anddomestic 16 per centvalue of GDP respectively, and small economies as Ireland words, theand value added exports asaccount estimated byand the50OECD. findrespectively. that exports account for Estonia where exports for 40 per centWe of GDP between 24 percent and 35 per cent of domestic value added in the Nordic countries, implying that the value significantly added figures also convey information that isThe not Nordic clear from gross trade trade doesBut contribute to domestic value added. countries fallfigures. between large First, the Nordic countries are in a different order in Figures 1 and 2. Specifically, exports coneconomies, such thesignificant United States France where international accounts tain the as most sourceand of domestic value added in Norwaytrade despite the factfor that9 itand 16 per cent of GDP and small economies such as Ireland and Estonia where exports was respectively, ranked the least open based on trade openness. The significant difference between the account for 40 and 50 per cent of GDP respectively. Figure 2 Value added % of GDP, 2009 Figureexports, 2: Value-Added Exports, % of GDP, 2009 % 60 50 40 30 20 10 0 Note: Domestic value added embodied in foreign final demand. *EA12 arithmetic average. Note: Domestic value Source: OECD.added embodied in foreign final demand. *EA12 arithmetic average Source: OECD. See e.g. Hummels et al. 2001, Daudin et al. 2011, Johnsson and Noguera 2012, and Koopman et al. 2014 for a macro perspective But the value added figures also convey information that is not clear from gross trade figures. First, and Ali-Yrkkö et al. 2011 for a micro and case-study perspective. These papers also consider the difficulties related to measuring the value added of exports. the Nordicdomestic countries are in a different order in Figures 1 and 2. Specifically, exports contain the most significant source of domestic value added in Norway despite the fact that it was ranked the least open based on trade openness. The significant difference between the gross figures and value added figures reflects the fact that Norway exports products that have a high degree of domestic value added, such as crude oil, natural gas and fish (see Section 3 below). Consequently, the gross 2 6 ETLA Raportit – ETLA Reports No 21 5 gross figures and added reflects the fact that Norway exports products have a Nordic countries. Thisvalue reflects thefigures fact that a significant portion of international tradethat in these high degree of domestic value added, such as crude oil, natural gas and fish (see Section becountries consists of re-exports or arbitrage trade that involves little domestic value added.3Hence, low). Consequently, the gross figures potentially underestimate the significance of international the figure suggests that the Nordic countries are comparable to other small European economies trade to Norway’s economy. Second, we may observe that the Netherlands and Belgium now fall wheninto we the consider the linkages ofNordic cross border activity. same category as the countries. This reflects the fact that a significant portion of international trade in these countries consists of re-exports or arbitrage trade that involves 2.2 Foreign Direct Investment little domestic value added. Hence, the figure suggests that the Nordic countries are comparable to otherinvestment small European economies when we consider the linkages of cross border activity. Foreign direct measures direct cross-border linkages in economic activity that concern longer lasting and more stable links between economies. FDI flows have the potential to transfers technological and business know-how internationally and increase the markets for domestic 2.2 Foreign Direct Investment producers as well as financing possibilities for smaller firms. FDI data provide a measure of interdependence thatinvestment is not accounted fordirect in international trade flows. in economic activity that Foreign direct measures cross-border linkages concern longer lasting and more stable links between economies. FDI flows have the potential Figure 3 shows inward and outward FDI in the Nordic countries and other OECD economies. The to transfers technological and business know-how internationally and increase the markets sharefor ofdomestic FDI varies significantly the Nordic countries. The ratio is the highest in Iceland, producers as wellbetween as financing possibilities for smaller firms. FDI data provide a 4 evenmeasure though itofhas the highest level of restrictions on FDI and ownerships among these countries. interdependence that is not accounted for in international trade flows. In contrast, the FDI share is the lowest in Finland and Norway, which have fewer restrictions on capital movements FDI. Furthermore, has attracted more inward than it has Figure 3 shows and inward and outward FDIIceland in the Nordic countries and other FDI OECD economies. The FDI, sharewhile of FDIthevaries significantly between theNordic Nordiccountries, countries.especially The ratio Denmark is the highest outward opposite is true for the other and in Iceland, even though it has the highest level of restrictions on FDI and ownerships among Finland. The high FDI-to-GDP ratios in Belgium, Ireland and the Netherlands are largely due to thesetax-induced countries.3 behaviour In contrast,bythe FDI share isfirms the lowest in Finland and Norway, specific multinational and due to low restrictions on which foreignhave investment and ownership restrictions. Figure 3 Foreign direct investment stocks in 2012, % of GDP Figure 3: Foreign Direct Investment Stocks in 2012, % of GDP Inward Outward 250 200 150 100 50 0 Note: Ordered by inward foreign direct investment. Nordic countries highlighted in red. Note: Ordered by inward foreign direct investment. Nordic countries highlighted in red. Source: UNCTAD. Source: UNCTAD. 4 3 See OECD FDI index at www.oecd.org/investment/index. This is only in part explained by the recent crisis; see Gwartney et al. (2013). See OECD FDI index at www.oecd.org/investment/index. This is only in part explained by the recent crisis; see Gwartney et al (2013). 7 Openness, Specialisation and Vulnerability of the Nordic Countries fewer restrictions on capital movements and FDI. Furthermore, Iceland has attracted more inward FDI than it has outward FDI, while the opposite is true for the other Nordic countries, especially Denmark and Finland. The high FDI-to-GDP ratios in Belgium, Ireland and the Netherlands are largely due to specific tax-induced behaviour by multinational firms and due to low restrictions on foreign investment and ownership restrictions. 6 Figure 4 shows the significant increase in FDI in the Nordic countries during the last three decades, whichthe is part of a global trendininFDI FDIinflows. The increase hasduring been particularly draFigure 4 shows significant increase the Nordic countries the last three decades, matic in Iceland since 2003. This is partly explained by its size – its economy is so small that which is part of a global trend in FDI flows. The increase has been particularly dramatic in Iceland even a single large investment has a very strong impact on the aggregate flows. Another pecusince 2003. This is partly explained by its size – its economy is so small that even a single large liarity is the inward FDI stock in Denmark which increased very rapidly in the late 1990s, but investment has aflat very strong impact on GDP. the aggregate flows. Another peculiarity is the has since been with respect to the Overall, the Nordic countries’ openness ininward terms FDI stock in Denmark which increased very rapidly in the late 1990s, but has since been flat with of inward and outward FDI stocks does not stand out in Europe even if we include larger econrespect omies.to the GDP. Overall, the Nordic countries’ openness in terms of inward and outward FDI stocks does not stand out in Europe even if we include larger economies. Figure 4a:4a Outward FDI,FDI, % of%GDP Figure Outward of GDP Figure Inward FDI, % GDP of GDP Figure 4b 4b: Inward FDI, % of 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 1980 1985 1990 1995 2000 2005 2010 1980 1985 1990 1995 2000 2005 2010 Denmark Finland Germany Denmark Finland Germany Iceland Norway Sweden Iceland Norway Sweden Source: UNCTAD. Source: UNCTAD. 2.3 Multinational enterprises 2.3 Multinational enterprises Another angle to look at a country’s openness is the interconnectedness of firms operating in each Anotherorangle to look at a country’s openness is5the interconnectedness of firms operating Cross-border activity and world trade areinto a country, the multinational enterprises (MNE). 4 each country, or the multinational enterprises Cross-border activityofand world trade significant degree intra-firm trade. In particular,(MNE). a relatively limited number multinational are to a significant degree intra-firm trade. In particular, a relatively limited number mulenterprises (MNEs) account for most of world trade. But studying MNEs also capturesofinformation tinational enterprises (MNEs) account for most of world trade. But studying MNEs also capabout interconnectedness that might not be captured either by trade flows or by foreign direct tures information about interconnectedness that might not be captured either by trade flows investment data. For example, a domestic MNE that has activities abroad may benefit from or by foreign direct investment data. For example, a domestic MNE that has activities abroad resources thatfrom are not domestically and is clearly in a and different position in terms poof shocks may benefit resources that areavailable not domestically available is clearly in a different tosition the domestic economy than fully domestic enterprises and vice versa. in terms of shocks to the domestic economy than fully domestic enterprises and vice versa. Figure 5 shows the inward activity of foreign MNEs in employment and value added as a percentage domestic employment andwevalue addedbutinnevertheless the Nordic countries and Germany. In These dataof aretotal of course correlated with the FDI stocks that just reviewed, they do offer an additional view. manufacturing, these shares are the largest in Sweden, where foreign MNEs account for 44 per cent of value added and 34 per cent of manufacturing employment. In Norway, the shares are 32 and 23 per cent, respectively. Denmark and Finland form a group of their own with Germany in terms of the share in value added. In services the importance of foreign MNEs is different. Specifically, MNEs have the largest share of labour and value added in Denmark, followed by Sweden, Norway 4 8 ETLA Raportit – ETLA Reports No 21 Figure 5 shows the inward activity of foreign MNEs in employment and value added as a percentage of total domestic employment and value added in the Nordic countries and Germany. In manufacturing, these shares are the largest in Sweden, where foreign MNEs account for 44 per cent of value added and 34 per cent of manufacturing employment. In Norway, the shares are 32 and 23 per cent, respectively. Denmark and Finland form a group of their own with Germany in terms of the share in value added. In services the importance of foreign MNEs is different. Specifically, MNEs have the largest share of labour and value added in Denmark, fol7 lowed by Sweden, Norway and Finland. Overall, the inward activity of foreign MNEs is relatively similar in Germany as in the Nordic countries in terms of value added. and Finland. Overall, the inward activity of foreign MNEs is relatively similar in Germany as in the Nordic countries in terms of value added. Figure 5a Inward activity of MNEs in manuFigure 5b Inward activity of MNEs in Figure 5a: Inwardin activity in Inward in activity in facturing 2010,of%MNEs of total Figure 5b: services 2010,of%MNEs of total services in 2010, % of total manufacturing in 2010, % of total 50 50 40 40 30 30 20 20 10 10 0 0 Denmark Finland Norway Sweden Germany Number of persons employed Value added at factor cost Denmark Finland Norway Sweden Germany Number of persons employed Value added at factor cost Note: data for Denmark in in 2009. 2009. Note: No No data for Iceland. Iceland. Denmark Source: OECD. Source: OECD. In contrast, Figure 7 shows the outward activity of domestic multinationals in manufacturing and total businessFigure sector.6Manufacturing MNEs activity have a significant share of their employment abroad. In contrast, shows the outward of domestic multinationals in manufacturing This is most significant in Finland where the ratio of domestic MNEs’ employment abroad to and total business sector. Manufacturing MNEs have a significant share of their employment domestic manufacturing employment 85 perwhere cent inthe 2010. is about 70 peremployment cent in abroad. This is most significant in was Finland ratioThe of ratio domestic MNEs’ Denmark Sweden, but much loweremployment in Norway and abroad toand domestic manufacturing wasGermany. 85 per cent in 2010. The ratio is about 70 per cent in Denmark and Sweden, but much lower in Norway and Germany. In total business sector, foreign employment is less significant than in manufacturing. Sweden has the strongest service sector firms (retail trade etc.) that lift the country to the first position in terms In total business sector, foreign employment is less significant than in manufacturing. Sweden of foreign employment relative to domestic employment. With the exception of Norway, the Nordic has the strongest service sector firms (retail trade etc.) that lift the country to the first position countries are quite different from Germany in that the domestic MNEs have a larger share of their in terms of foreign employment relative to domestic employment. With the exception of Nortotal activities abroad. This is natural due to their smaller size, but also reflects the extent that these way, the Nordic countries are quite different from Germany in that the domestic MNEs have a countries are specialised in particular tasks in the production chain. larger share of their total activities abroad. This is natural due to their smaller size, but also reflects the extent that these countries are specialised in particular tasks in the production chain. Table 1 shows which countries are the most important in terms of domestic MNEs’ employment abroad. In general, Germany, China and the United States stand out as the main destination countries along with Sweden for the other Nordic countries. Interestingly, Finnish MNEs have the highest share of their labour in large transition and developing countries with Russia, China, India and Brazil totalling almost 30 per cent of total foreign employment. 9 Openness, Specialisation and Vulnerability of the Nordic Countries 8 Figure 6 Outward activity of domestic multinationals, number of persons employed Figure activity domesticemployment multinationals, 7: Outward abroad perofdomestic (%)number in 2010of persons employed abroad per domestic employment (%) in 2010 90 80 70 60 50 40 30 20 10 0 Denmark Finland Manufacturing Norway Sweden Germany Total business sector (B to S excl. O) Note: Total business sector employment is calculated as total less agriculture, hunting, forestry and fishing, Note: Total business sector employment is calculated as employment total employment less agriculture, hunting, forestry and fishing, andgovernment less general employment. government employment. to thetotal OECD, total employment in general government and less general According According to the OECD, employment in general government as a as a of the labour force in Germany 201110.6 was 10.6 per cent. percentagepercentage of the labour force in Germany in 2011in was per cent. Source: OECD and own calculations. Source: OECD and own calculations. Table 1 shows which countries are the most important in terms of domestic MNEs’ employment abroad. In general, Germany, China and the United States stand out as the main destination Table 1 Domestic multinationals’ employment abroad, total business sector in 2010, countries along with Sweden for the other Nordic countries. Interestingly, Finnish MNEs have the % of total highest share of their labour in large transition and developing countries with Russia, China, India %Finland %Sweden%Germany % and Brazil Denmark totalling almost 30 per cent of%Norway total foreign employment. China 9.7Sweden 13.0Sweden 18.0USA 16.0USA 13.0 Table 1: USA Domestic Multinationals’ Employment Abroad,7.5Germany Total Business Sector in 2010, % of total 7.7Russia9.8USA 8.7UK 6.6 Denmark Germany % 7.7China Finland %8.8Denmark Norway %6.7China Sweden % Germany 6.1China 6.6 % China USA Germany Sweden UK Sweden 5.7France 5.8 9.7 6.9Germany Sweden 13.08.4UK Sweden 18.05.6France USA 16.0 USA 13.0 Russia 9.86.5Germany USA 7.55.0Denmark Germany 8.7 UK UK7.7 6.5India 4.8Poland 5.06.6 Poland 5.9USA 5.7Poland 3.8UK 4.7Brazil 4.46.6 7.7 China 8.8 Denmark 6.7 China 6.1 China 6.9 3.7Poland Germany 8.44.8India UK 5.63.7Norway France 5.7 France India 4.4Czech Rep. 4.45.8 Russia3.4Estonia 4.6OFC 3.4Poland 4.3Austria 3.95.0 6.5 India 6.5 Germany 5.0 Denmark 4.8 Poland Poland Norway 5.9 3.0Brazil USA 5.73.4Thailand Poland 3.83.0Finland UK 4.7 Brazil 3.9Spain 3.64.4 France 3.0UK 2.9China 2.9Spain 3.4Italy India 3.7 Poland 4.8 India 3.7 Norway 4.4 Czech Republic 3.14.4 Russia Note: OFC3.4 Estoniafinancial centres. 4.6 OFC 3.4 Poland 4.3 Austria 3.9 = Offshore own calculations. Norway Source: OECD 3.0 and Brazil 3.4 Thailand 3.0 Finland 3.9 Spain 3.6 France 3.0 UK 2.9 China 2.9 Spain 3.4 Italy 3.1 Note: OFC = Offshore financial centres. Source: OECD Basedand onown the calculations. international comparison, we conclude that the Nordic countries are open econ- omies. They are much more dependent on international trade than large euro area countries, smaller countriescomparison, such as Greece or Portugal. termscountries of aggregate trade economies. figures, the Based onorthe international we conclude thatBut the in Nordic are open do not on appear particularly open when compared other small They areNordic much countries more dependent international trade than large euro areatocountries, orcountries smaller in countries such as Greece or Portugal. But in terms of aggregate trade figures, the Nordic countries 10 ETLA Raportit – ETLA Reports No 21 Europe. Furthermore, there is no clear ordering of the Nordic countries in terms of their openness using the different indicators. To understand what lies below the surface, we next look at the export structures of these countries. 3Specialisation This section studies the degree of specialisation of export industries in the Nordic countries. We first discuss the main export goods and industries for each country. Second, we assess how Nordic economies compare to world markets. Finally, we analyse the significance of the specialised sectors in value added terms. 3.1Exports Table 2 shows the Nordic countries’ and Germany’s top-five export products in 2012 using the three-digit level of SITC Rev 3 with 255 product categories. Despite the Nordic countries’ highly educated labour force, the exports of raw materials and low-tech processed products comprise a relatively large share of their exports. Norway and Iceland are the clearest examples of this. In Norway, crude petroleum oil and natural gas add up to a combined share of 61 per cent and fresh fish an additional 5 per cent of total goods exports. In Iceland, 37 per cent of exports are aluminium and 35 per cent are fresh or lightly processed fish. Table 2 Top-5 export goods, % of gross exports, 2012 Denmark Medicaments (incl. veterinary medicaments) Petroleum oils or bituminous minerals > 70 % oil Petroleum oils, oils from bitumin. materials, crude Other meat and edible meat offal Medicinal and pharmaceutical products, excluding 542 Finland Paper and paperboard Petroleum oils or bituminous minerals > 70 % oil Flat-rolled products of alloy steel Telecommunication equipment, n.e.s.; & parts, n.e.s. Other machinery for particular industries, n.e.s. Iceland Aluminium Fish, fresh (live or dead), chilled or frozen Fish, dried, salted or in brine; smoked fish Feeding stuff for animals (no unmilled cereals) Pig iron & spiegeleisen, sponge iron, powder & granu Note: Three-digit level of SITC Rev 3. Source: UNCTAD, own calculations. %Norway 8.1 4.7 4.6 3.7 2.8 Petroleum oils, oils from bitumin. materials, crude Natural gas, whether or not liquefied Petroleum oils or bituminous minerals > 70 % oil Fish, fresh (live or dead), chilled or frozen Aluminium %Sweden 12.5 10.7 4.5 2.7 2.4 % 37.1 27.5 7.2 3.6 3.4 Petroleum oils or bituminous minerals > 70 % oil Paper and paperboard Telecommunication equipment, n.e.s.; & parts, n.e.s. Parts & accessories of vehicles Medicaments (incl. veterinary medicaments) Germany Motor vehicles for the transport of persons Parts & accessories of vehicles Medicaments (incl. veterinary medicaments) Aircraft & associated equipment; spacecraft, etc. Apparatus for electrical circuits; board, panels % 33.9 27.0 5.6 4.7 2.6 % 7.8 5.7 4.3 3.8 3.7 % 10.3 3.8 3.2 3.0 2.2 10 Table 2 Top-5 Export goods, % of Gross Exports, 2012 11 Openness, Specialisation and Vulnerability of the Nordic Countries % Norway % (incl. veterinary medicaments) 8.1 Petroleum oils, oils from bitumin. materials, crude 33.9 s or bituminous minerals > 70 % oil 4.7 Natural gas, whether or not liquefied 27.0 s, oils from bitumin. materials, crude 4.6 Petroleum oils or bituminous minerals > 70 % oil 5.6 In the other Nordic countries the pattern is less marked. In Finland, almost 20 per cent of exnd edible meat offal 3.7 Fish, fresh (live or dead), chilled or frozen 4.7 ports are forest industry products, of which 12.5 percentage points are paper and paperboard. d pharmaceutical products, excluding 542 2.8 Aluminium 2.6 Also, petroleum oils or bituminous minerals, which are mainly manufactured from import% % Sweden ed crude oil, have become one of the main export products. The formerly important mobile perboard 12.5 Petroleum oils or bituminous minerals > 70 % oil 7.8 phone exports10.7 havePaper all but ended, but there remains significant research and development s or bituminous minerals > 70 % oil and paperboard 5.7 (R&D) activity 4.5 in this field. Denmarkequipment, and Sweden a more structure of exoducts of alloy steel Telecommunication n.e.s.;have & parts, n.e.s. heterogeneous 4.3 port goods and no single product comprises such a large share of total exports, but petroleum ication equipment, n.e.s.; & parts, n.e.s. 2.7 Parts & accessories of vehicles 3.8 and products thereof do constitute significant share of exports also in3.7these countries. A sigery for particular industries, n.e.s. 2.4 Medicaments (incl.aveterinary medicaments) nificant share % of Germany’s Germanyexports consists of cars, but otherwise no%single product category 37.1role. Motor vehicles for the transport of persons 10.3 plays a dominant ve or dead), chilled or frozen 27.5 Parts & accessories of vehicles 3.8 alted or in brine; smoked fish We may note already 7.2 Medicaments (incl. veterinary medicaments) 3.2 from this table that there are significant differences in the extent that the for animals (no unmilled cereals) 3.6 Aircraft & associated equipment; spacecraft, etc. 3.0 Nordic countries have concentrated on producing only in a few product groups. In particular, iegeleisen, sponge iron, powder & granu 3.4 Apparatus for electrical circuits; board, panels 2.2 the top-10 export product groups account for 89 per cent of exports in Iceland, 80 per cent in Norway, 44 per cent in Finland, 36 per cent in Sweden and 34 per cent in Denmark. In Germany, the top-10 exporttoproduct groups accountexports for 31 per cent of total exports. ot of manufacturing production has moved China in particular, of services have -digit level of SITC Rev 3. Source: UNCTAD, own calculations. creasingly important for many countries. In 2012, Sweden accounted for 1.7 per cent of While a lot of manufacturing production has moved to China in particular, exports of servicexports of services, Denmark 1.5 per cent, Norway for 1.0 cent, Finland 0.7Sweden accounted for 1.7 es havefor become increasingly important for per many countries. In for 2012, nd Iceland for 0.1 per cent. After the turn of the century, the shares of Finland and Sweden per cent of the global exports of services, Denmark for 1.5 per cent, Norway for 1.0 per cent, Finland has for 0.7 per cent and Iceland for 0.1 per cent. After the turn of the century, the shares slightly, while that of Norway declined a little. Meanwhile, all Nordic countries Finland have and Sweden have risen slightly, whileinthat of Norway has declined a little. Meany Denmark, Finland and ofSweden) experienced declining shares world merchandise while, all Nordic countries (especially Denmark, Finland and Sweden) have experienced declining shares in world merchandise exports.5 o assess the characteristics of Nordic countries more systematically, we next compare In order to assess the characteristics of Nordic countries more systematically, we next compare orld markers. We first look at the diversification index of export goods. It measures to them to world markers. We first look at the diversification index of export goods. It measures nt the structure of exports an extent individual countryofdiffers from export structure of thefrom the export structo of what the structure exports of anthe individual country differs e index is calculated as ture of the world. The index is calculated as �� = ∑����� ��� � � , where hij exports is the share of good ij in theh total exports of country j and hi is the share of the good s the share of good i in the total of country and i is the share of the good in total 6 in total world exports. Thus, the index takes values from zero to one, where a value closer to orts.7 Thus, the index takes values from zero to one, where a value closer to one indicates one indicates a bigger difference from the world total. ifference from the world total. Figure 7 shows the diversification index of export goods for Nordic countries and Germany hows the diversificationasindex of export goods for7 Norway Nordic and countries Germany as index values, implying that calculated by UNCTAD. Icelandand score the highest 8 by UNCTAD. Norway Iceland scoreinthethese highest indexdiffers values, implying that theand export structure countries significantly fromthe the world average. Finland Denmark rank next, while Germany are closest ucture in these countries and differs significantly from theSweden world and average. Finland and to the structure of global exAs we can see, the countries’ structures relative to theAs rest of the world have been rank next, while Swedenports. and Germany are closest to theexport structure of global exports. relatively stable over the past almost two decades. The largest relative declines in the index e, the countries’ export structures relative to the rest of the world have been relatively have occurred in Sweden and Denmark, while there has been a relative increase in Germany. NCTAD. is a modified Finger-Kreinin5 (1979) measure of similarity in trade. Data by UNCTAD. parison relative to EU countries’ export structures, see Kaitila (2013). 6 7 The index is a modified Finger-Kreinin (1979) measure of similarity in trade. For a comparison relative to EU countries’ export structures, see Kaitila (2013). 11 12 ETLA Raportit – ETLA Reports 11 No 21 stable over the past almost two decades. The largest relative declines in the index have occurred in 11 anddecades. Denmark, there has been a relative increase Germany. pastSweden almost two Thewhile largest relative declines in the index haveinoccurred in Figure 7 been Diversification index ofin export goods enmark, while there has a relative Germany. Figureincrease 8: Diversification index of export goods stable over the past almost two decades. The largest relative declines in the index have occurred in Sweden and Denmark, index while of there has been Figure export goodsa relative increase in Germany. 0.908: Diversification 0.90 0.70 0.80 0.60 0.70 0.50 0.60 0.40 0.50 0.30 0.40 0.30 0.20 1995 0.20 995 . Figure 8: Diversification index of export goods 0.80 2000 Denmark Finland 2000 1995 Denmark Source: UNCTAD. Iceland Source: UNCTAD. 2005 2005 Finland 2000 Norway Denmark 2010 Iceland Finland Sweden Iceland 2010 2005 Norway Germany Norway Sweden Sweden 2010 Germany Germany Source: UNCTAD. Next, we look at the concentration of each country’s export goods. The degree of market at the concentration of each export goods. Thecountry’s degree of market Next, we lookcountry’s at the the concentration concentration of each each export goods.The Thedegree degreeofofmarket marketconNext, we look at of country’s export goods. concentration canHerfindahl-Hirschmann be assessed by the Herfindahl-Hirschmann (HH) index. The index isis given by an be assessed concentration by the (HH) index. The index is given by be assessed by Herfindahl-Hirschmann the Herfindahl-Hirschmann (HH) index. index given centration cancan be assessed by the (HH) index. TheThe index is given by by ��� = � ��� � �∑� � ��� ���� �� � ���� � �� � � �� � � � �� �∑� � ���� �� ����∑��� �� , � =��� = �� �� � � � �������� , � , � of exports exports for country and with goodni,i,the andnumber � = ∑ of ��� with n the where xxijij is the jvalue where of and good and the number num- of ∑����jjgood value of exports for value country and good andfor ��country =j and � where xij is the of exports fori, country �� =� ∑������� ��� with n the number of �� i, and ber of individual goods. The index takes on values from zero to unity, where unity denotes individual goods. The index takes on values from zero to unity, where unity denotes concentration ds. The index takes on valuesindex from zero to where individual goods. onunity, values fromunity zerodenotes to unity,concentration where unity denotes concentration concentration onlytakes a single good. to only aThe singletogood. good. to only a single good. Figure 98 shows shows the the HH HHindex indexasascalculated calculatedby byUNCTAD. UNCTAD.Unsurprisingly, Unsurprisingly, Iceland Iceland and andNorway Nor- are Figure theFigure HH index as by UNCTAD. Unsurprisingly, Iceland and Norway way are group of as their own as countries that have very concentrated export and structures. 9 shows theinHH index by have UNCTAD. Unsurprisingly, Iceland Norway are in acalculated group ofa their own ascalculated countries that very concentrated exportare structures. Denmark, eir own as countries that have very concentrated export structures. Denmark, Denmark, Sweden and Germany are together at about the same level in terms of their export are together at about same level in export terms ofstructures. their exportDenmark, good in a group Sweden of theirand ownGermany as countries that have verytheconcentrated good concentration despite the fact that these countries differ considerably in their size. In we ermany are together at about the same level in terms of their export good concentration despite the fact that these countries differinconsiderably in their size.good In contrast, Sweden and Germany are together at about the same level terms of their export contrast, we may observe that Finland has in had a more export than its espite the fact that countries differhas considerably their size.concentrated In contrast, wethanstructure may these observe that Finland had a more concentrated export structure its neighbours, but that concentration despite the factthere that has these countries differdecline considerably in their size. In contrast, neighbours, but that been a considerable in the concentration of Finnish ex- we at Finland has had more concentrated export structure than its neighbours, butexports that during the last fifteen thereahas been a considerable decline in the concentration of Finnish ports the last similar, albeitexport more moderate hasneighbours, also occurredbut that may observe thatduring Finland has fifteen had a years. more Aconcentrated structuredecline than its a considerable decline the concentration of Finnish exports the lastinfifteen years. Ain similar, albeit more moderate decline has during also occurred Sweden. in Sweden. there has been a considerable decline in the concentration of Finnish exports during the last fifteen r, albeit more moderate decline has also occurred in Sweden. years. A similar, albeit more moderate decline also occurred inproduction Sweden. and exports than Intuitively, small countries are more likelyhas to specialise in their large countries. However, the Nordic countries tend to represent the extremes of this general tendency. This can be seen from Figure 9 which plots the HH index and population in the EU27 countries, Iceland, Norway and Switzerland. Especially Denmark and Sweden seem to be less specialised than small countries on average, while Iceland and Norway are much more specialised than the other countries. 13 Openness, Specialisation and Vulnerability of the Nordic Countries 12 12 Figure 8 Figure Herfindahl-Hirschmann index of index export good concentration 9: Herfindahl-Hirschmann Figure 9: Herfindahl-Hirschmann index of of export exportgood goodconcentration concentration 0.50 0.45 0.40 0.50 0.45 0.40 0.35 0.35 0.30 0.30 0.25 0.25 0.20 0.20 0.15 0.15 0.10 0.10 0.05 0.05 0.00 1995 2000 0.00 1995 Denmark Source: UNCTAD. Denmark 2005 Finland Iceland 2000 Finland Iceland Norway 2005 Norway 2010 Sweden Germany 2010 Sweden Germany Source: small UNCTAD. Intuitively, countries are more likely to specialise in their production and exports than large countries. However, the Nordic countries tend to represent the extremes of this general tendency. This can be seen from Figure 10 which plots the HH index and population in the countries, Intuitively, small countries are more likely to specialise in their production andEU27 exports than large Iceland, Norway and Switzerland. Especially Denmark and Sweden seem to be less specialised than countries. However, the Nordic countries tend to represent the extremes of this general tendency. smallbecountries on average, while Iceland are much more specialised the other This can seen from Figure 10 which plotsand theNorway HH index and population in thethan EU27 countries, countries. Source: UNCTAD. Iceland, Norway and Switzerland. Especially Denmark and Sweden seem to be less specialised than Figure 9 Herfindahl-Hirschmann index and population in 2012 in the EU27 countries, small countries onHerfindahl-Hirschmann average, Iceland andand Norway are in much thanIceland, the other Figure 10: population 2012more in the specialised EU27 countries, Iceland,while Norway and index Switzerland Norway and Switzerland countries. 0.50 Figure 10: Herfindahl-Hirschmann index and population in 2012 in the EU27 countries, Iceland, 0.45 IS Norway and Switzerland NO 0.50 0.45 HH index 0.40 HH index 0.35 0.30 0.40 0.35 IS CY NO EL 0.30 IE 0.25 0.20 CY LT CHEL 0.15 NL IE FI 0.25 0.10 SE LT 0.20 0.05LV CHDK PT 0.15 0.00 0.10 DE AT FI0 SE DK Source: UNCTAD. Source: UNCTAD. LV 0.05 PT AT 0.00 0 10 Source: UNCTAD. 10 NL 20 20 30 30 40 50 Population, millions 40 50 Population, millions 60 70 80 90 DE 60 70 80 90 13 14 ETLA Raportit – ETLA Reports No 21 3.5 Revealed Comparative Advantage 3.2 Revealed Comparative Advantage ently used indicator of countries’ specialisation is the revealed comparative advantage Another frequently used indicator of countries’ specialisation is the revealed comparative ading Balassa (1965). It compares a country’s exports in a particular industry to a vantage (RCA), following Balassa (1965). It compares a country’s exports in a particular inp’s total exportsdustry in thetosame industry. More specifically, thesame RCAindustry. for industry � is a reference group’s total exports in the More specifically, the RCA for industry is calculated as ���� = �� / ∑� �� , ��,� / ∑� ��,� where xof denotes domestic exports of industry i and X group’s denotesexports the reference otes domestic exports of group’s exports i industry � and ��,� denotes the referencew,i of industry i. Consequently, a higher-than-average export share in a specific nsequently, a higher-than-average export share in a specific industry is reflected in an industry is reflected in an RCA figure above one and a lower than average export share is reflected in RCA ove one and a lower than average export share is reflected in RCA below one. below one. ws the RCA in 28 industries for the Nordic countries and Germany.9 We rank the Figure 10 shows the RCA in 28 industries for the Nordic countries and Germany.8 We rank the heir RCA to illustrate the by structural differences in these countries. For in these counindustries their RCA to illustrateand thesimilarities structural differences and similarities 3 on the horizontal refers to rank the industry the third-highest in eachwith the third-highest tries.axis For example, 3 on the with horizontal axis refers toRCA the industry equently, the ordering differs across countries. RCA in each country. Consequently, the ordering differs across countries. 14 RCA marise the graph as follows. First, there exists an expected pattern in specialisation Figure 10 RevealedFigure Comparative Advantage (RCA) 11: Revealed Comparative Advantage es. In particular, all the Nordic countries are highly specialised in some industries, as CA figures that exceed three. In the case of Iceland and Norway, these industries 3 , and mining and quarrying, while in Sweden and Finland they include wood and manufacturing. In Denmark, food products constitute a highly specialised industry. In any–albeit a much larger though open economy–has no single industry as specialised 2 c countries. 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Rank of RCA Industry Denmark Finland Iceland Norway Sweden Germany Note: Industries rankedranked by their RCA.RCA. ForFor a full listlistofofthe A1ininthe theAppendix. Appendix. Note: Industries by their a full theindustries industriesand andrankings, rankings, see Table Table A1 TheThe top-3 RCA figures are Denmark (4.2, 3.1, 2.2), Finland (11.3, 5.1, 1.8), Iceland (24.4, 7.4, 6.5), Norway (18.7, 5.7, 2.4), and top-3 RCA figures are Denmark (4.2, 3.1, 2.2), Finland (11.3, 5.1, 1.8), Iceland (24.4, 7.4, 6.5), Norway (18.7, 5.7, 2.4), Sweden (7.1, 6.7, 4.3). Industries included (28 in total): Agriculture, hunting and forestry; Fishing; Mining and Quarrying; and Sweden (7.1, 6.7, 4.3). Industries included (28 in total): Agriculture, hunting and forestry; Fishing; Mining and Manufacturing (Food and beverages; Tobacco; Textiles; Wearing apparel etc.; Leather etc.; Wood; Paper; Printing; Coke, Quarrying; Manufacturing (Food and beverages; Tobacco; Textiles; Wearing etc.; Leather etc.; Wood; Paper; ref. petroleum prod. and nuclear fuel; Chemicals; Rubber and Plastics; Otherapparel non-metallic; Basic metals, Fabricated Printing; Coke, ref. petroleum and nuclear fuel; Chemicals; Rubber machinery; and Plastics; Other machinery non-metallic; Basic metal prod.; Machinery andprod. equipment; Office, accounting and computing Electrical and apRadio,metal television and communication equipment; Medical, precision andand optical instruments; Motor vehicles; metals,paratus; Fabricated prod.; Machinery and equipment; Office, accounting computing machinery; Electrical Otherand transport; Furniture, manufacturing), Electricity, gas and water;Medical, Real estate, renting and activities; machinery apparatus; Radio,other television and communication equipment; precision andbusiness optical instruments; Other community and personal services. Motor Source: vehicles; Other transport; Furniture, other manufacturing), Electricity, gas and water; Real estate, renting and OECD. business activities; Other community and personal services. Source:8 OECD See Table A1 in the Appendix. the Appendix. Second, the RCA figures show a particular pattern in Norway and Iceland, which are specialised in only a few sectors. In both countries there are four RCA industries, i.e., industries where the RCA value exceeds unity. In contrast, Denmark, even though it is a small country, has an RCA in 16 industries. Thus, based on the RCA indicator, Denmark has a more diversified export structure than Openness, Specialisation and Vulnerability of the Nordic Countries 15 We may summarise the graph as follows. First, there exists an expected pattern in specialisation across countries. In particular, all the Nordic countries are highly specialised in some industries, as reflected in RCA figures that exceed three. In the case of Iceland and Norway, these industries include fishing, and mining and quarrying, while in Sweden and Finland they include wood and paper related manufacturing. In Denmark, food products constitute a highly specialised industry. In contrast, Germany – albeit a much larger though open economy – has no single industry as specialised as in the Nordic countries. Second, the RCA figures show a particular pattern in Norway and Iceland, which are specialised in only a few sectors. In both countries there are four RCA industries, i.e., industries where the RCA value exceeds unity. In contrast, Denmark, even though it is a small country, has an RCA in 16 industries. Thus, based on the RCA indicator, Denmark has a more diversified export structure than any other Nordic country, or even Germany. Further, Finland and Sweden, while they are highly specialised in paper and wood related production, are not solely reliant on these industries. This also reflects the structural similarities in businesses in Finland and Sweden. 3.3 Value added exports Similar to the gross export figures, a potential caveat with traditional specialisation indicators is that they do not necessarily tell anything about each industry’s contribution to domestic value added. For example, it may well be that a particular industry has a revealed comparative advantage, but the industry is so small that it has a negligible effect on domestic value added. This would be the case if a significant portion of the sector’s inputs were imported from abroad, or if the sector’s overall role in international trade is very small. In the following, we aim to address this caveat. The first step is to look at value added across industries in total exports. Table 3 shows the value added embodied in foreign final demand by industries as calculated by the OECD. Above, in Figure 2, we saw these data for the countries without the division into industries. First, we note that manufacturing contributes the largest single share of domestic value added embodied in foreign final demand in all Nordic countries except Norway where mining industries are very dominant. Important value-added creating service industries are business services, transport and telecommunication, but also wholesale and retail trade. Financial intermediation brought significant value added exports to Iceland still in 2009, but it is likely to have lost some of its importance during the years that followed. In manufacturing, the most significant sources of value added are wood and paper related manufacturing (in Finland and Sweden), chemicals, machinery, and electrical equipment. Furthermore, basic metals and the manufacturing of transport equipment bring significant value added especially in Sweden and Germany. Our second step is to look at the value added created in the industries in which each country is specialised, i.e. in which it has a revealed comparative advantage. This essentially addresses the question of how dependent the domestic economy is on its RCA industries. Unfortunately, there is little data on the value added exports based on the same industrial classification as shown above for the RCA industries. Also, making inference based on Table 3 would not make 16 Table 3 ETLA Raportit – ETLA Reports No 21 Value added exports by industry in 2009, % of GDP DenmarkFinland Iceland Norway SwedenGermany Agriculture, hunting, forestry and fishing Mining and quarrying 0.9 0.6 3.2 0.6 0.7 0.2 1.50.20.716.90.60.1 Manufacturing 12.010.612.7 5.212.512.2 –Food products, beverages and tobacco 2.3 0.2 0.5 0.5 0.3 0.4 16 0.2 –Textiles, textile products, leather and footwear 0.1 0.2 0.0 0.1 0.1 –Wood, paper, paper products, printing and publishing 0.5 1.8 1.4 0.5 1.7 0.7 –Chemicals and non-metallic mineral products 2.0 5.4 0.9 2.5 2.4 10 2.8 each industry by the export share of its production. This yields a reasonable approximation of the –Basic metals and fabricated metal products 0.9 1.2 0.5 0.8 2.1 1.9 value added exports to the extent that the value added content of exports is similar to the production –Machinery and equipment, nec 1.9 1.8 0.2 1.1 2.0 2.5 sold domestically. – Electrical and optical equipment 2.12.43.60.41.41.6 – Transport equipment Figure 12 shows the cumulative value added exports0.30.40.20.31.31.7 by RCA industries, including the first n – Manufacturing nec; recycling 0.60.10.20.10.40.3 industries that have an RCA above one. It illustrates the importance of the industries in which the countries specialised in. For example, the first two combined value Electricity, are gas and water supply 0.5RCA industries’ 0.6 0.6 0.7 added0.7 0.6 Construction 0.20.20.10.30.30.2 exports is 6.1 per cent of Iceland’s GDP. The third-ranked RCA industry raises this to 8.3 per cent. Wholesale and retail trade; hotels and restaurants 2.8 2.0 2.2 2.9 3.7 2.5 The figureand shows, consistent with the previous analysis, value added a Transport storage, post and telecommunication 5.9 that the 4.1 3.3 produced 3.4 by only 2.8 2.0 few industries is significant in Norway and Iceland, as implied by the steep cumulative value added Financial intermediation 0.90.94.01.31.00.9 curve. Inservices other countries, the value added of exports 3.64.56.03.47.35.6 is more evenly distributed across RCA Business Other services industries, as reflected in the slope of the curve that is0.91.00.20.71.21.0 much less steep and quite similar across countries. Total 28.624.132.434.529.924.7 This is in contrast with the gross trade figures for the same industries (Figure 13). In particular, Source: OECD. According to the OECD, “Value-Added embodied in Foreign Final Domestic Demand shows how while in terms of gross Finland appears be more its RCA industries, thisthrough is industries export value exports both through direct final to exports anddependent via indirecton exports of intermediates othnot directly supported theconsumers value added figures. However, comparingand Figure 12 and Table 3, reflect er countries to foreign by final (households, charities, by government, as investment). They how industries (upstream a value-chain) are connected to consumers in the other countries, even where no diwe may also note that the in RCA industries only accounts for a portion of total value added rect trade foreign relationship TheThe indicator illustrates therefore the full upstream impact of final demand in forembodied finalexists. demand. service industries are significant for all Nordic countries, as eign markets to domestic output. It can most readily be interpreted as ‘exports of value-added’”. can be seen from Table 3. The gross exports of RCA industries overestimate the economies’ dependency on these industries due to the import content. On the other hand, the value added exports underestimate it to the extent justice for differences across countries due to its relatively aggregated classification. other domestic industries supply the RCA industries with intermediate products. Value Added Exports, % of GDP Thus, we opt to estimate the value added embodied in RCA industries’ exports by multiplying the value 9 Figure 12: Cumulative Value Added Exports RCA of industries in 2007-2009, % yields of GDPa reasonable added created by each industry by the exportbyshare its production. This approximation of16the value added exports to the extent that the value added content of exports is similar to the production sold domestically. 12 Figure 11 shows the cumulative value added exports by RCA industries, including the first n 8 an RCA above one. It illustrates the importance of the industries in which industries that have the countries are specialised in. For example, the first two RCA industries’ combined value 4 added exports is 6.1 per cent of Iceland’s GDP. The third-ranked RCA industry raises this to 8.3 per cent. 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 The figure shows, consistent with the previous Rank of RCAanalysis, Industry that the value added produced by only Denmark Finland Iceland a few industries is significant in Norway and Iceland, as implied by the steep cumulative value Norway Sweden Germany added curve. In other countries, the value added of exports is more evenly distributed across Note:industries, The cumulativeas value added embodied in foreign demand of goods, the first n industries that have RCA reflected in the slopefinal of the curve thatincluding is much less steep and quite similar an RCA above one and ranked by their RCA values. Data is for 2007 (Denmark, Norway, Sweden), 2008 (Germany) across countries. and 2009 (Iceland and Finland). � 10 In exports for for industry industry �i as ���� � ��� ∗ ( �),, where �� V A�i isistotal In particular, particular,we wecalculate calculatethe the value value added added exports total value-added, value-added, Xi is (gross) �� exports and Y is (gross) production. Due to data availability, the exports only include the exports of goods. i � is (gross) exports and � is (gross) production. Due to data availability, the exports only include the exports of goods. 9 � � we may also note that the RCA industries only accounts for a portion of the total value added embodied foreign final demand. The service industries are significant for all Nordic countries, as can be seen from Table 3. Openness, Specialisation and Vulnerability of the Nordic Countries 17 The gross exports of RCA industries overestimate the economies’ dependency on these industries due to the import content. On the other hand, the value added exports underestimate it to the extent other domestic industries supply the RCA industries with intermediate products. Figure 11 Cumulative value added exports by RCA industries in 2007–2009, % of GDP Value Added Exports, % of GDP Figure 12: Cumulative Value Added Exports by RCA industries in 2007-2009, % of GDP 16 12 8 4 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Rank of RCA Industry Finland Sweden Denmark Norway Iceland Germany Note: The cumulative value added embodied in foreign final demand of goods, including the first n industries that have Note: The cumulative value added embodied in foreign final demand of goods, including the first n industries that have an RCA above one and ranked by their RCA values. Data is for 2007 (Denmark, Norway, Sweden), 2008 (Germany) and an RCA above one and(Iceland ranked their RCA values. Data is for 2007 (Denmark, Norway, Sweden), 2008 (Germany) 2009 andby Finland). OECD Structural Analysis Database and own calculations. and 2009 (IcelandSource: and Finland). 10 � In particular, we calculate the value added exports for industry � as ���� � ��� ∗ ( �), where ��� is total value-added, 17 �� �� is (gross) exports and �� is (gross) production. Due to data availability, the exports only include the exports of goods. Source: OECD Structural Analysis Database and own calculations. Figure 12 Cumulative gross exports by RCA industries in 2009, % of GDP Figure 13: Cumulative Gross Exports by RCA industries in 2009, % of GDP Gross Exports, % of GDP 32 28 24 20 16 12 8 4 0 1 2 3 Denmark Norway 4 5 6 7 8 9 10 11 12 13 14 15 16 Rank of RCA Industry Finland Sweden Iceland Germany Note: The cumulative exportsincluding of goods, including first n industries that have an RCAabove aboveone one and and ranked Note: The cumulative gross exports gross of goods, the first the n industries that have an RCA ranked by by their RCA values. their RCA values.Source: OECD Structural Analysis Database and own calculations. Source: OECD Structural Analysis Database and own calculations. Since the data that we use are from 2007-2009 it is potentially influenced by the global recession and the fall in international trade towards the end of this three-year period. For example, the economic crisis and the fall of Nokia, the Finnish ICT giant, have had a significant effect on the 18 ETLA Raportit – ETLA Reports No 21 This is in contrast with the gross trade figures for the same industries (Figure 12). In particular, while in terms of gross exports Finland appears to be more dependent on its RCA industries, this is not directly supported by the value added figures. However, by comparing Figure 11 and Table 3, we may also note that the RCA industries only accounts for a portion of the total value added embodied foreign final demand. The service industries are significant for all Nordic countries, as can be seen from Table 3. The gross exports of RCA industries overestimate the economies’ dependency on these industries due to the import content. On the other hand, the value added exports underestimate it to the extent other domestic industries supply the RCA industries with intermediate products. Since the data that we use are from 2007–2009 it is potentially influenced by the global recession and the fall in international trade towards the end of this three-year period. For example, the economic crisis and the fall of Nokia, the Finnish ICT giant, have had a significant effect on the Finnish economy. This can be seen from Figure 13 which shows the cumulative value of exports by RCA industries in 2007 and 2009, both in gross and value added terms. In particular, it shows the significant decrease in domestic value added from telecommunications equipment. Prior to the crisis, Finland was considerably more dependent on its RCA industries and in particular on the production of communication equipment and thus vulnerable to shocks in those industries. Since then major shocks have hit important export industries and Finland has experienced a sharp reduction in the significance of its RCA industries and their significance is now closer to Sweden and Denmark.10 18 Figure 13 Cumulative exports by RCA industries in Finland 2007–2009, % of GDP Figure 14: Cumulative Exports by RCA industries in Finland 2007-2009, % of GDP 30 Value-Added (2009) 25 Value-Added (2007) Gross Exports (2009) 20 Gross Exports (2007) 15 10 5 0 Paper Wood Electrical Machinery and Basic metals machinery and equipment apparatus Coke, ref. Other transport Radio, Fabricated petroleum television and metal prod. prod. and communication nuclear fuel equipment Electricity, gas and water supply Source: OECDStructural StructuralAnalysis AnalysisDatabase Databaseand andown owncalculations. calculations. Source: OECD 4 Vulnerability In 10order to assessthethe vulnerability ofperform the economies to external shocks wecountries. suggest comparing three Unfortunately data do not allow us to a similar sensitivity analysis for the other different indicators: the terms of trade, the degree of specialisation, and the concentration of exporting activities among exporting firms. 4.1 Terms of Trade First, the ratio of export to import prices, i.e. the terms of trade, may be used as an indicator of the domestic economy’s vulnerability to external shocks (see e.g. Rodrik 1996). The terms of trade 19 Openness, Specialisation and Vulnerability of the Nordic Countries 4Vulnerability In order to assess the vulnerability of the economies to external shocks we suggest comparing three different indicators: the terms of trade, the degree of specialisation, and the concentration of exporting activities among exporting firms. 4.1 Terms of trade First, the ratio of export to import prices, i.e. the terms of trade, may be used as an indicator of the domestic economy’s vulnerability to external shocks (see e.g. Rodrik, 1996). The terms of trade carry two types of information. First, the trend component is an indication of the medium-to-long-term development of the domestic economy and the purchasing power of domestic exports given their volumes. Second, the volatility of the terms of trade around its trend tells about the sensitivity of the domestic economy to shocks. For example, the world market prices of raw materials have been rather volatile and on an upward trend recently, and we may thus expect countries with dependence on raw material exports to show positive but volatile terms of trade developments. This suggests that the purchasing power of such economies tends to fluctuate significantly unless the economy is buffered against the shocks. Figure 14 shows the terms of trade for the Nordic countries in 1991–2013. It shows the significant increase in Norway’s terms of trade during the last two decades. In Iceland, the re19 Figure 14 Terms of trade, 1991=100 Figure 15: Terms of Trade, 1991=100 200 180 160 140 120 100 80 1991 1993 1995 Denmark 1997 Finland 1999 2001 Iceland 2003 2005 Norway 2007 2009 Sweden 2011 2013 Germany Source: OECD Economic Outlook No. 94 and own calculations. Terms of trade is the ratio of exports of goods and ser- Source: OECD Economic Outlook No. 94 and own calculations. Terms of trade is the ratio of exports of goods and vices deflator to imports of goods and services deflator. Denmark, Iceland and Germany in 2005 prices, Finland in 2000 services deflator to imports of goods and services Denmark, Iceland Germany 2005ofprices, Finland in prices, Norway in 2010 prices, and Sweden in 2012deflator. prices. Note that the curves areand affected by theinchoice the national base years. 2000 prices, Norway in 2010 prices, and Sweden in 2012 prices. Note that the curves are affected by the choice of the national base years. Figure 16 plots the terms of trade volatility and the value added share of exports to GDP in 18 countries. The two axes, which are placed at the arithmetic averages, divide the graph into four quadrants, which illustrate different characteristics of economies.12 For example, countries in the top-right quadrant are potentially highly vulnerable to external shocks due to the combination of 20 ETLA Raportit – ETLA Reports No 21 20 Figure 15 Terms of trade volatility Figure 16: Terms of Trade Volatility Value Added Trade, % of GDP 60 IE 50 EE 40 30 DK NL UK 20 NO IS SE DE FI FR IT EL 10 US 0 0 2 4 6 8 10 Terms of Trade Volatility Note: Terms of trade volatility is measured by the standard deviation of the log of the first difference in the terms of Note: Terms of trade volatility by the standard deviation of the log ofexcluding the first Norway difference the terms of trade. The axesis aremeasured placed according to the arithmetic sample averages and in Iceland. and own trade. The axes areSource: placedOECD according tocalculations. the arithmetic sample averages excluding Norway and Iceland. Source: OECD and own calculations. cent global recession brought a significant shock to its terms of trade. In contrast, Denmark 4.2 Specialisation and Germany have benefited from relatively steady terms of trade. In Finland, there has been a steady declinemay in terms of trade sinceabout the turn the millennium. Indue Sweden, the trend deThe terms of trade volatility not tell anything the of vulnerability that is to export cline seems to have ended in 2005. specialisation or export quantities as it only concerns nominal fluctuations. Yet, the more concentrated the export is, theofmore country is likely be toofexternal Figure 15 structure plots the terms tradeexposed volatilitythe and the value addedtoshare exports shocks to GDP in in demand for its export products. This is most clearly illustrated in Figure 17 which shows HHinto 18 countries. The two axes, which are placed at the arithmetic averages, divide the the graph 11 specialisation index against value added trade.different However, while thereofare some significant four quadrants, which illustrate characteristics economies. For example, countries in the top-right quadrant are potentially highly vulnerableand to external differences in international comparison, it turns out that the specialisation terms ofshocks trade due to the combination of high terms-of-trade volatility and a high value-added-trade share. volatility give broadly a similar picture of the vulnerability of Nordic countries. Iceland andIn contrast, countries in the bottom-left quadrant are less vulnerable to external shocks due to a low level Norway are again clear outliers in our sample and Finland is left to the right of the origin, reflecting of value added from exports and low terms of trade volatility. a more specialised structure. In contrast, Germany is now placed in the bottom-left quadrant that could be characterised as including less vulnerable economies. Clearly, Iceland and Norway are significant outliers in their exposure to international shocks. Their terms-of-trade volatility, which is driven by their reliance on commodity exports and the recent crisis, greatly exceeds that of any other economy in our sample. On the other hand, other Nordic countries are closer to the origin, reflecting their more stable terms of trade. In particular, Denmark has benefitted from stable terms of trade over time. In Finland, volatility has been more pronounced, but interestingly it has been equal to the volatility in Germany. 11 We exclude Iceland and Norway from the arithmetic average as they are clear outliers. 21 Openness, Specialisation and Vulnerability of the Nordic Countries 4.2Specialisation The terms of trade volatility may not tell anything about the vulnerability that is due to export specialisation or export quantities as it only concerns nominal fluctuations. Yet, the more concentrated the export structure is, the more exposed the country is likely to be to external shocks in demand for its export products. This is most clearly illustrated in Figure 16 which shows the HH specialisation index against value added trade. However, while there are some significant differences in international comparison, it turns out that the specialisation and terms of trade volatility give broadly a similar picture of the vulnerability of Nordic countries. Iceland and Norway are again clear outliers in our sample and Finland is left to the right of the origin, reflecting a more specialised structure. In contrast, Germany is now placed in the bottom-left quadrant that could be characterised as including less vulnerable economies. 21 Figure 16 Specialisation Figure 17: Specialisation Value Added Trade, % of GDP 60 IE 50 EE 40 BE 30 AT DK IS SE NL ES UK DE 20 IT 10 NO FI FR US 0 0 0.1 0.2 0.3 0.4 0.5 HH Specialisation Index Note: The axes are placed according to the arithmetic sample averages excluding Norway and Iceland. Note: The axes areSource: placedOECD according the arithmetic sample averages excluding Norway and Iceland. and owntocalculations. Source: OECD and own calculations. 4.3 Exporting enterprises 4.3 Exporting Enterprises far we on have focused of onspecialisation measures of specialisation and concentration in termsproducts. of export So far we haveSofocused measures and concentration in terms of export products. However, many it isofnot just the goods numberthat of exported goodslimited, that can be However, in many countries, it isinnot justcountries, the number exported can be quite quite limited, but also the number of exporting firms. This may expose countries to shocks that but also the number of exporting firms. This may expose countries to shocks that hit one particular hit one particular firm, as has been the case in Finland recently due to the fall of Nokia. In parfirm, as has been the case Finland recently dueproducts to the fall Nokia. In particular, this is the case of ticular, this isinthe case when traded areof differentiated or heterogeneous in terms when traded products are differentiated or heterogeneous in terms of their quality in and their quality and hence subject to changes in, e.g. consumer preferences thehence worldsubject markets. to changes in, e.g. consumer preferences in the world markets. To illustrate the concentration of exports among exporting enterprises, Figure 17 shows To illustrate the exports among Figure 18 shows top-10 theconcentration top-10 exportoffirms’ share of theexporting exports ofenterprises, the top-1,000 exporter firms the in the Nordic 13 12 countries. of Finnish extra-EU exports areNordic run by countries. just ten firms, while the Almost export firms’ share of theAlmost exports37ofper thecent top-1,000 exporter firms in the 37 per cent of Finnish extra-EU exports are run by just ten firms, while the figure in intra-EU Unfortunately, these data are not available for Norway or Iceland. exports is almost 45 per cent. The figures are somewhat lower in Denmark, Sweden and Germany, except in German extra-EU exports.14 Also, the figure shows that intra-EU trade is more concentrated in a small number of exporting firms than extra-EU trade in Finland while the opposite is true in Denmark and Sweden. 12 22 ETLA Raportit – ETLA Reports No 21 22 22 Figure 17 Top-10 exporter firms’ export value in 2010, % of top-1000 exporter firms FigureFigure 18: Top-10 exporter firms' export %ofoftop-1000 top-1000 exporter firms 18: Top-10 exporter firms' exportvalue valuein in 2010, 2010, % exporter firms 50 50 40 40 30 20 30 20 10 10 0 Denmark 0 Finland Sweden Extra-EU trade Finland Denmark Source: OECD. Source: OECD. Germany Intra-EU trade Sweden Extra-EU trade Germany Intra-EU trade Figure 19 shows that these countries tend to have highly concentrated export markets when Source: OECD. compared to other OECD countries. In particular, all Nordic countries have an above- average figure intra-EU is almost 45highly per cent. TheWhile figures are somewhat lower concentration exports in aexports smalltend number of exporting firms. theexport concentration likelyintoDenmark, Figure 19 shows thatofinthese countries to have concentrated marketsis when 13 Sweden and countries. Germany, except in German extra-EU exports. Also, theabovefigure shows that intrabe affected byOECD country size, it is notable that otherallsmall economies, suchhave as Austria and the compared to other In particular, Nordic countries an average EU trade moreless concentrated inexporter-firm a small number of exporting firms than extra-EU trade in Netherlands, have aismuch concentrated concentration. concentration of exports in a small number of exporting firms. While the concentration is likely to Finland while the opposite is true in Denmark and Sweden. Figurethat 19: other Top 10small Enterprise Share such as Austria and the be affected by country size, it is notable economies, Netherlands, have a much 45 less concentrated exporter-firm concentration. EE Value Added Trade, % of GDP Value Added Trade, % of GDP Figure 1840 Top 10 enterprise share Figure 19: Top 10 Enterprise Share 35 45 30 40 25 35 20 30 15 25 20 AT DK UK FR NL ES AT IT 10 5 0 15 SE NL 0 10 10 IT UK FR 20ES EE DE FI PT SE EL DK DE PT 30 EL of Exports Top 10 Enterprise Share FI 40 50 5 Note: Top-10 enterprise share of exports of the top-1,000 enterprise exports as measured by the average of extra- and intra-EU trade. The 0 axes are placed at arithmetic averages. Sources: OECD and own calculations. 0 10 20 30 40 50 Top 10 Enterprise Share of Exports Note: Top-10 enterprise share of exports of the top-1,000 enterprise exports as measured by the average of extra- and Note: Top-10 enterprise the top-1,000 enterprise intra-EUshare trade. of Theexports axes areof placed at arithmetic averages.exports as measured by the average of extra- and Sources: OECD and own calculations.averages. intra-EU trade. The axes are placed at arithmetic Sources: OECD and own calculations. However, as a much larger country, the top-1,000 exporting firms must run a somewhat smaller share of total exports than in the much smaller Nordic countries. This bias twists the results to some degree, though probably not too much. 13 Openness, Specialisation and Vulnerability of the Nordic Countries 23 Figure 18 shows that these countries tend to have highly concentrated export markets when compared to other OECD countries. In particular, all Nordic countries have an above- average concentration of exports in a small number of exporting firms. While the concentration is likely to be affected by country size, it is notable that other small economies, such as Austria and the Netherlands, have a much less concentrated exporter-firm concentration. 5Conclusions We have discussed the openness and specialisation of the Nordic economies. We have demonstrated that they are open economies and deeply engaged in international trade although the domestic value added share in exports and GDP varies. We have shown that each Nordic country is specialised in some specific industries which also tend to constitute a significant source of value added to the domestic economy. This is consistent with the conventional wisdom regarding the characteristics of the Nordic countries. However, we also suggest that there exist significant differences in the vulnerability of the Nordic countries to external shocks. First, Norway and Iceland are clear outliers in terms of their specialisation and potential vulnerability. Yet, while the Norwegian economy is more exposed to fluctuations in its export prices, its term of trade has evolved very favourably and after years of very large surpluses the country is well buffered against even drastic downturns in the prices. Second, Sweden and Denmark appear to be the least specialised among the Nordic countries in their exports as they have a relatively large number of industries where they have a revealed comparative advantage. Finland has fewer such industries. However, the economy’s overall dependence on these industries is not much different from that of Sweden or Denmark, now that the exceptional dependency of Finnish exports on communication equipment has declined significantly. Denmark, seems to be the least vulnerable to external shocks and it has clearly benefitted from improved and more stable terms of trade. Inward and outward FDI stocks and the cross-border activities of domestic and foreign multinationals are, with some differences, more or less at the same level in Denmark, Finland and Sweden. The latter has attracted the most FDI inflows relative to its GDP and these have been drawn especially into manufacturing. On the other hand, Denmark and Finland have more important manufacturing investments abroad. Iceland has the highest FDI-stocks-to-GDP ratios among the Nordic countries but on the other hand it is by far the smallest of the economies. Norway seems to be more closed than the other Nordic countries at least in terms of outward investments, which is peculiar given their vast financial resources. 24 ETLA Raportit – ETLA Reports No 21 References Ali-Yrkkö, J., Rouvinen, P., Seppälä, T., Ylä-Anttila, P. (2011). Who Captures Value in Global Supply Chains? Case Nokia N95 Smartphone, Journal of Industry, Competition and Trade, Vol. 11, No. 3, pp. 263–78. Balassa, B. (1965). Trade Liberalization and “Revealed” Comparative Advantage. Manchester School, Vol. 33, No. 2, pp. 99–123. Daudin, G., Rifflart, C., Schweisguth, D. (2011). Who Produces for Whom in the World Economy? Canadian Journal of Economics, Vol. 44, No. 4, pp. 1403–37. Finger, J. M., Kreinin, M. E. (1979). A measure of ‘export similarity’ and its possible uses. Economic Journal, Vol. 89, pp. 905–12. Gulan, A., Haavio, M., Kilponen, J. (2013). Kiss Me Deadly: From Finnish Great Depression to Great Recession, Bank of Finland, mimeo. Hummels, D., Ishii, J., Yi, K.-M. (2001). The Nature and Growth of Vertical Specialization in World Trade. Journal of International Economics, Vol. 54, No. 1, pp. 75–96. Johnsson, R.C., Noguera, G. (2012). Accounting for intermediates: Production sharing and trade in value added. Journal of International Economics, Vol. 86, No. 2, pp. 224–36. Kaitila, V. (2013). “Specialisation and/or Convergence: Structure of European Exports and Production”, ETLA Working Papers 12. Koopman, R., Wang, Z., Wei, S.-J. (2014). Tracing Value-Added and Double Counting in Gross Exports. American Economic Review, Vol. 104, No. 2, pp. 459–94. Rodrik, D. (1998). Why Do More Open Economies Have Bigger Governments? Journal of Political Economy, Vol. 106, No. 5, pp. 997–1032. Vitek, F. (2013). Spillovers to and from Nordic Economies: A Macroeconomic Model Based Analysis. IMF Working Paper, No. 13/225. 25 Openness, Specialisation and Vulnerability of the Nordic Countries 25 Appendix Appendix Table A1. Industries ranked by RCA RCA # Denmark 1 Fishing Finland Paper Iceland Fishing Norway Fishing 2 Food and beverages Wood Food and beverages Mining and quarrying Paper Motor vehicles 3 Electricity, gas and water supply Electrical machinery and apparatus Basic metals Electricity, gas and water supply Wood Real estate, renting and business activities 4 Machinery and equipment Other transport Coke, ref. petroleum prod. and nuclear fuel Printing Printing 5 Fabricated metal prod. Basic metals Other non-metallic Basic metals 6 Other non-metallic Coke, ref. petroleum prod. and nuclear fuel Medical, precision and optical instruments Other transport Machinery and equipment Electricity, gas and water supply Machinery and equipment Electricity, gas and water supply 7 Other transport Food and beverages Coke, ref. petroleum prod. and nuclear fuel Rubber and plastics Radio, television and communication equipment Fabricated metal prod. Other community, social and personal service activities Machinery and equipment Machinery and equipment Fabricated metal prod. Fabricated metal prod. Chemicals Paper Electrical machinery and apparatus Paper Tobacco Electrical machinery and apparatus 8 Wearing apparel etc. 9 Agriculture, hunting and forestry Sweden Fishing Germany Tobacco 10 Machinery and equipment Electricity, gas and water supply Coke, ref. petroleum prod. and nuclear fuel Fabricated metal prod. Motor vehicles Other transport 11 Medical, precision and optical instruments Other non-metallic Motor vehicles Wood Chemicals Electrical machinery and apparatus 12 Wood Medical, precision and optical instruments Electrical machinery and apparatus Medical, precision and optical instruments Basic metals Chemicals 13 Chemicals Rubber and plastics Agriculture, hunting and forestry Electrical machinery and apparatus Rubber and plastics Medical, precision and optical instruments 14 Furniture, other manufacturing Real estate, renting and business activities Rubber and plastics Chemicals Medical, precision and optical instruments Other non-metallic 15 Rubber and plastics Chemicals Fabricated metal prod. Furniture, other manufacturing Wood 16 Printing Printing Textiles Other non-metallic 17 Textiles Motor vehicles Printing Printing Radio, television and communication equipment Furniture, other manufacturing Other non-metallic 18 Leather etc. Food and beverages Wood Rubber and plastics Food and beverages 19 Paper Agriculture, hunting and forestry Paper Other transport 20 Coke, ref. petroleum prod. and nuclear fuel Textiles Mining and quarrying Radio, television and communication equipment Motor vehicles 21 Leather etc. Leather etc. 22 Mining and quarrying Furniture, other manufacturing Wearing apparel etc. 23 Office, accounting and computing machinery Wearing apparel etc. 24 Other community, social and personal service activities 25 Motor vehicles 26 Basic metals Other community, social and personal service activities Mining and quarrying Other transport 27 Radio, television and communication equipment 28 Real estate, renting and business activities Source: OECD Food and beverages Basic metals Furniture, other manufacturing Textiles Office, accounting and computing machinery Wearing apparel etc. Other community, social and personal service activities Office, accounting and computing machinery Wearing apparel etc. Office, accounting and computing machinery Textiles Office, accounting and computing machinery Textiles Tobacco Other community, social and personal service activities Leather etc. Office, accounting and computing machinery Furniture, other manufacturing Leather etc. Leather etc. Fishing Radio, television and communication equipment Real estate, renting and business activities Agriculture, hunting and forestry Agriculture, hunting and forestry Tobacco Tobacco Wearing apparel etc. Other community, social and personal service activities Mining and quarrying Electricity, gas and water supply Real estate, renting and business activities Real estate, renting and business activities Tobacco Radio, television and communication equipment Agriculture, hunting and forestry Coke, ref. petroleum prod. and nuclear fuel Fishing Mining and quarrying Aikaisemmin ilmestynyt ETLA Raportit-sarjassa (ennen ETLA Keskusteluaiheita) Previously published in the ETLA Reports series (formerly ETLA Discussion Papers) No 6 Ville Kaitila – John McQuinn – Iulia Siedschlag – Xiaoheng Zhang, International Investment and Firm Performance: Empirical Evidence from Small Open Economies. 1.3.2013. 40 p. 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