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The following OECD assessment and recommendations summarise chapter 4 of the Economic Survey of Finland published on 7 April 2010.

Inequality has increased over the past two decades

Along with GDP, income distribution is an important indicator of well–being. While inequality of disposable income in Finland remains among the lowest in the OECD, it has increased in recent years despite a substantial decline in unemployment rates since the 1990s recession. Like in most other OECD countries this reflects technical change, rising globalisation and shifting demographics. In Finland strong realised capital gains and income shifting promoted by the dual tax system have also been important factors. Loopholes in the dual tax system therefore need to be addressed.

Despite growing inequalities, Finland’s tax and transfer system remains effective in maintaining material living standards both across the social spectrum, and across the country. Measured by the regional distribution of factor income and employment however, inequality has risen more steeply lately, as a result of greater concentration of economic activity in the south of the country. These developments pose serious challenges for both the central government and the hundreds of municipal governments due to the recession and the need for fiscal consolidation. Efforts to promote regional development seem to have had limited success to date, and any expansion of existing programmes is likely to further strain public finances. While there is little scope to increase the already generous welfare system, the targeting of existing measures could be improved. A more even distribution of labour market opportunities could be achieved by further promoting the interregional mobility of unemployed workers.

Income inequality in selected OECD countries

Source: OECD (2008), Growing Unequal? Income Distribution and Poverty in OECD Countries.

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.

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For further information please contact the Finland Desk at the OECD Economics Department at eco.survey@oecd.org.

The OECD Secretariat's report was prepared by Henrik Braconier and Petar Vujanovic under the supervision of  Piritta Sorsa. Research assistance was provided by Isabelle Duong.