
©Antti Talvitie, 2026.
Finland’s Economic Geography: Liikenne 6 PlanFinland is an island. Sort of. Geography, location, distance from markets, and access to ports have shaped her economic fate and limited or slowed economic growth and market integration. Finland’s subsidy-distorted economic geography has a twenty-year run into a dead-end. To maintain 25% export BKT share and 40% export-related employment make the turnaround urgent. This paper proposes the key to doing it. The 2009 World Development Report observes that “well-connected regions benefit from scale economies … that isolated regions cannot …” Landlocked or remote economies are disadvantaged by high transport costs and limited market access. Finland is a disadvantaged area.
According to Nobel-prize winner Paul Krugman, incremental infrastructure investments have delivered only limited results to transform economies, but network level investments have overcome the limits of geography. Scaled up solutions are needed in Finland to alter economic geography to reduce time-distance, alter inefficient spatial patterns, and with policies and new institutions foster economic growth.
Using Infrastructure to Transform Economic Destiny
Scaled-up infrastructure investments will reshape Finland’s economic geography and economy. For example, in Korea and China infrastructure was used to integrate geographically disadvantaged areas. Transport facilities were planned and implemented to do more than reduce transport cost, but to “inducing industries locate and access directly major markets, ports, and airports.” This was intentional. According to the World Bank, improved expressways and ports integrated “inland regions with coastal growth areas”, giving rise to manufacturing and export-oriented regional clusters.
Delivery and financing of scaled-up infrastructure facilities must be viewed as a commercial enterprise, not as a social service by government administration from general revenue (and borrowing). The best means for this are corporate entities (like the Öresund bridge), which operate under commercial law and recover costs over time through user charges, tolls, and fuel taxes, not from the budget and subsidies.
Large infrastructure programs will build domestic construction and engineering capabilities. Sustained demand for construction services and materials, and engineering skills foster internationally competitive firms. Infrastructure investment supports industrial development and strengthens supply chains. It transforms economic geography when built ahead of demand, financed largely through domestic capital.
Although transport sector investment has increased in Finland, fragmented and inefficient transport investments have not generated corridor-level efficiency to reduce logistics costs and stimulate economic development. Finland has a high (but stagnated) income level, trade integration, and good institutional framework with access to proven infrastructure technologies, but infrastructure investments have emphasized restoring and maintaining existing networks (and doing it bureaucratically and awfully slowly) rather than expanding them at the scale required to support transformation of economic development.
The Rationale for Building Ahead of Demand
David Aschauer argued that public infrastructure investment has had a positive effect on long-run growth in the United States. More recent literature emphasizes where economic activity takes place and how firms and households organize themselves and shows that transportation investments have long-lasting effects on regional economic structure.
Infrastructure assets are long-lived and costly to modify. Delayed and fragmented investment can solidify inefficient spatial forms. Binyam Reja argues that responding to economic development is costly. Anticipating growth is more effective when building ahead of demand
Benefit Cost Analysis (BCA) and other methods do not capture the economic value of large investments. They place greatest weight on travel time savings, accident avoidance, and emissions, rarely on pricing of travel, and are ill-suited to projects that reshape economic geography. The most important impacts of system-scale investments do not arise directly from time savings, but from firm location, access to markets, and, especially, private investment. These effects can rarely be attributed to a single project. Transformative network investments may be weak in ex-ante BCA appraisal, when the initial demand is low, which favors incremental projects with easily quantifiable benefits. This is the case in Finland.























