Long-run growth and welfare effects of public policies with distortionary taxation

In a one-sector growth model with infrastructure investment, we study the impact of fiscal policies on growth. The government collects taxes on labor income and profits. The government uses these revenues to purchase infrastructure investment, provide utility enhancing government services, and to provide transfer payments to the households. We show that the balanced growth rate is an increasing function of the percent of government revenues that goes to infrastructure. We find that the growth maximizing mix of taxes depends on the elasticity of substitution between inputs. In particular, with distortionary taxes, the growth maximizing tax rate on capital is higher the lower the elasticity of substitution between private physical capital and public capital. In addition, the growth maximizing size of the government is higher when the elasticity of substitution between public and private inputs is low. We also investigate welfare effects of other public expenditures as well. Depending on the elasticity of substitution in production, the welfare implications of different public policies can be substantial.     

Fostering proactive behaviour: The role of work-related reflection,psychological empowerment,and participative safety for innovative behaviour and job crafting

This contribution aimed at investigating how work-related reflection as cognitive efforts towards developing an understanding of work tasks, the surrounding work context, and one's professional competencies adds to the role of psychological empowerment and participative safety in predicting innovative behaviour and job crafting as two forms of proactivity. Quantitative data from 295 employees of micro, small, and medium-sized organizations in the information sector were collected with a cross-sectional questionnaire. For hypotheses testing, structural equation modelling was employed. The results of the study showed that work-related reflection and psychological empowerment were substantially related to innovative behaviour and job crafting while participative safety only played a minor role. These findings imply that jobs need to contain empowering and sufficiently complex work tasks that require reflection and provide occasions for reflective interactions to enable employees to create efficient routines and adapt to changes at work. Furthermore, experiences of empowerment need to be rooted in social interactions at work. Likewise, the value of reflection will only unfold if employees and supervisors regularly engage in reflection.     

Identifying structural VARs from sparse narrative instruments: Dynamic effects of US macroprudential policies

We study identification in Bayesian proxy VARs for instruments that consist of sparse qualitative observations indicating the signs of shocks in specific periods. We propose the Fisher discriminant regression and a non-parametric sign concordance criterion as two alternative methods for achieving correct inference in this case. The former represents a minor deviation from a standard proxy VAR, whereas the non-parametric approach builds on set identification. Our application to US macroprudential policies finds persistent declines in credit volumes and house prices together with moderate declines in GDP and inflation and a widening of corporate bond spreads after a tightening of capital requirements or mortgage underwriting standards.