Matti Mitrunen: War Reparations, Structural Change, and Intergenerational Mobility
Job talk. Matti Mitrunen is a PhD Candidate at the Institute for International Economic Studies (IIES) at Stockholm University. He will present a paper entitled "War Reparations, Structural Change, and Intergenerational Mobility".
Photo: Matti Mitrunen.
This paper presents evidence that government industrial promotion can move labor out of agriculture into manufacturing and have long-term effects via increased human capital accumulation in the next generation. I use variation generated by the Finnish war reparations (1944-1952) that forced the largely agrarian Finland to give 5% of its yearly GDP in industrial products to the Soviet Union. To meet the terms, the Finnish government provided short-term industrial support that persistently raised the employment and production of the treated, skill-intensive industries. I trace the impact of the policy using individual-level registry data and show that the likelihood of leaving agriculture for manufacturing and services increased
substantially in municipalities more affected by the war reparations shock. These effects were persistent: 20 years after the intervention, the reallocated workers remained in their new sectors and had higher wages. Younger cohorts affected by the new skill-intensive opportunities obtained higher education and were more likely to work in white-collar occupations by 1970. Finally, I link parents to children to study how the policy affected intergenerational mobility. I show that mobility in both incomes and education increased in the more exposed locations.