VATT in the 2000s: Financial crisis, sustainability gap and changes in the research landscape

During Seija Ilmakunnas’ term as director general VATT transformed into an academic research institute. “Sound economic policy advice and good policy preparation can only be based on quality research”, she sums up the need for the transformation.

Seija Ilmakunnas

Civil servants or academic researchers?

On Ilmakunnas’ proposal, the Ministry of Finance ordered an external evaluation of VATT’s activities in 2007. A review panel was setup with representatives from universities and research institutes from Finland and abroad. The key message of the review panel was that the academic quality of VATT’s research needs to be improved upon.

– The results were hardly surprising, but they did serve as support for necessary reforms, Ilmakunnas states.

When Ilmakunnas took up the position as general director, researchers at VATT had varying strengths and backgrounds. The old-timers did valuable analysis work, but they did not have the same academic training as the younger employees and this created internal tensions.

– People had very differing ideas about what VATT should do and how it should be developed. Nowadays, this might be hard to understand, because the transformation into an academic research institute is so obvious, Ilmakunnas describes the early days of her term.

Improving the quality of publications was central to improving the academic quality of research. To this end, it was necessary to device a payment scheme that made the strategic goal of publishing more international peer-reviewed articles more concrete. 

– We needed a system that gave recognition for high-quality academic publications, but not just for that. It would have been unfair, if other expert tasks were not taken into account. Afterall, VATT is not a university, Ilmakunnas concludes. 

Quality research to support decision-making

– Sound economic policy advice and good policy preparation can only be based on quality research, Ilmakunnas summarizes the importance of economic research for policymaking. 

In a best-case scenario, research satisfies both the need for policy evaluation and the researcher’s academic ambitions. 

– In an ideal situation, we can construct a reliable research design with a good control group and detect real causality. Then we are able to determine the effects of a reform in a straightforward manner, Ilmakunnas describes.

This is the ideal scenario, but policy-relevant research often involves bargaining.

– There are reforms that cannot be combined with research that is as academically ambitious as researchers would wish. In such cases, we must be willing to make compromises, Ilmakunnas adds.

It is important that researchers and policymakers listen to each other.

– From a researcher’s perspective, the most important thing is that schedule is feasible. It is advisable that researchers and experts are already involved in setting up the research agenda. This produces research projects that are feasible and questions that are realistic to answer, Ilmakunnas states.

As an example of good policy preparation, Ilmakunnas mentions the 2008-2010 taxation working group chaired by the then Undersecretary Martti Hetemäki. VATT not only chaired the whole project but also prepared a lot of research for the working group.

– The Hetemäki working group was integral in encouraging public debate and as an example of good policy-preparation. The working group was broadly welcomed, but politicians were not as quick to adopt the group’s proposals. Nevertheless, since then many of proposals have been gradually implemented, Ilmakunnas explains.

Sustainability gap and financial crisis

In the 2000s, the need for a comprehensive restructuring of local government and services became increasingly apparent. The population was aging rapidly, and working groups were setup to discuss how the nation should prepare for this challenge.

– Research conducted at VATT on extending working careers and the efficiency of public services was a very important part of this work. Others did not really have this type of research expertise, says Ilmakunnas.

Following the financial crisis in 2008, these themes gained new impetus. 

– The financial crisis spooked people. The sustainability gap became even wider and there was a genuine worry that we will run out of money, Ilmakunnas describes the general atmosphere following the crisis.

Mergers and external funding

When the Finnish university reform started in the early 2000s, there was also a desire to shake up the government research institutes. There were repetitive projects, inquiries and proposals. Some government institutes were merged to form new larger institutes, like the Finnish institute for health and welfare.

– It was a very uncertain time and people were also worried at VATT. There was talk that they planned to consolidate all government research institutes into four producer consortiums: one studying sustainable development, the other knowhow, work and welfare, the third regional structures and the fourth something else. But, VATT studies all of these! Ilmakunnas exclaims.
There were also expressed wishes of steering research institutes through the government program.

– If research goals are determined by the government program, then there is a very real risk that the agenda of a single government would have too much weight in the selection of research themes, Ilmakunnas ponders.
In 2013, two new funding mechanisms were established: The Strategic Research Council (SRC) and the joint analysis, assessment and research activities, coordinated by the government (VN TEAS).

– The good thing about the joint government research activities (VN TEAS) is that representatives from different ministries are coming together to determine which questions need to be investigated. Hopefully, the ministries have also gained more expertise on how and within what timeframe research can be conducted, Ilmakunnas praises the new funding mechanisms.

Synthesis of mathematics and economy 

In her doctoral thesis, Ilmakunnas looked at women’s participation in the labour market and choices between daycare and homecare. It is true that there are proportionately more women working in labour economics than other fields of economic research. However, Ilmakunnas’ own choice was a pure coincidence.

– As a young researcher, I was working at ETLA and we had a very inspiring study group in labour economics. Later, I happened to choose labour supply as the topic for my project for a PhD course organised by the Yrjö Jahnsson foundation and I continued with the theme during my research visit to the London School of Economics. Chance played a big role in these decisions, Ilmakunnas says.

Her career now continues as a Professor of Practice at Jyväskylä University School of Business and Economics. Ilmakunnas’ chosen field of study continues to interest her: 

– In Economics, I was intrigued by the synthesis of mathematics and economy. I have had no reason to regret my choice. It was quite a good decision, she says happily.

Seija Ilmakunnas

Master of Science (Economics) 1984, Tampere University 
Licentiate of Social Sciences (Economics) 1989, University of Helsinki
Doctor of Social Sciences (Economics) 1997, University of Helsinki

Research Institute of the Finnish Economy, different roles 1983-1988
City of Helsinki, Senior Researcher 1988-1993
Labour Institute for Economic Research, Senior Researcher 1993-1998
VATT Institute for Economic Research, Head of Research 1999-2001
Finnish Centre for Pensions, Head of Research Department 2002-2006
VATT Institute for Economic Research, Director General 2007-2010
Labour Institute for Economic Research, Director 2011-2018
Jyväskylä University School of Business and Economics, Professor of Practice of Economics 2019

In addition, many honorary posts and memberships in working groups setup by the Economic Council of Finland, ministries and others.


Read other interviews published in the VATT 30 years series:

The early days of VATT: Welfare state assessment during the great Finnish depression and the Nokia boom years