Finland and New Zealand: A Cross-Country Comparison of Economic Performance

Dave Frame

No 00/01, Treasury Working Paper Series from New Zealand Treasury

Abstract: The working paper compares and contrasts the macroeconomic performance of the New Zealand and Finnish economies over the entire post-WW2 period. It notes that Finland has gradually overtaken NZ in terms of GDP per capita, productivity performance and export performance. Finland suffered a severe recession in the early 1990s (the deepest affecting any western industrialised economy in the Post WW2 period). Very high growth rates since 1994 in Finland may partly be ascribed to cyclical rebound from this recession, with much of the remainder driven by rapid growth in the telecommunications giant Nokia. Finland also faces some particular policy challenges: high structural unemployment, medium term fiscal pressures from an ageing population and impediments to the growth of small and medium sized enterprises. The paper shows that differences in economic performance between New Zealand and Finland cannot simply be ascribed to contrasting policy approaches. Cultural and geographical differences, and historical antecedents have also played a role. There may be lessons to learn from Finland’s approach to education and R&D policy. The Finnish approach of experimenting with different policy settings and carefully evaluating their effect is also instructive. In most other respects, Finland’s economic strategy bears a close resemblance to that of New Zealand.

Date: 2000

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