the expected inflation channel of government spending in the postwar u s abstract there exist sticky price models in which the output response to a government spending change can be large if the central bank is nonresponsive to inflation according to this expected inflation channel government spending drives up expected inflation which in turn reduces the real interest rate and leads to an increase in private consumption this paper examines whether the channel was important in the post wwii u s with particular attention to the 2009 recovery act period first we show that a model calibrated to have a large output multiplier requires a large response of expected inflation to a government spending shock next we show that this large response is inconsistent with structural vector autoregression evidence from the federal reserve s passive policy period 1959 1979 then we study expected inflation measures during the recovery act period in conjunction with a panel of professional forecaster surveys a cross country comparison of bond yields and fiscal policy news announcements we show that the expected inflation response was too small to engender a large output multiplier

profit sharing and productivity some further evidence new estimates for west germany indicate overall productivity differentials of 20 30 percent in favor of firms practicing profit sharing these compare with estimates of 3 8 percent for comparable british firms reported in a recent issue like the u k results they reveal important interactions between profit sharing and other firm specific characteristics reinforcing the view that profit sharing be regarded as an integral element of overall organizational design but the fact that in germany profit sharing is apparently used in a different way than in the united kingdom by different kinds of firms suggests that there is no single uniquely appropriate context and role for profit sharing copyright 1990 by royal economic society

what accounts for the changes in u s fiscal policy transmission using vector autoregressions on u s time series for 1957 79 and 1983 2004 we find government spending shocks to have stronger effects on output consumption and wages in the earlier period we try to account for this observation within a dsge model featuring price rigidities and limited asset market participation specifically we estimate the structural parameters of the model for both periods by matching impulse responses model based counterfactual experiments suggest that most of the changes in fiscal policy transmission are accounted for by increased asset market participation and the more active monetary policy of the volcker greenspan period

profit sharing and productivity microeconomic evidence from the united states profit sharing has often been suggested as a potential solution to principal agent problems in the workplace the relationship between productivity and profit sharing is examined using a panel dataset drawn from 2 976 publicly held companies over the 1971 85 period alternatively using firm intercept and first difference specifications the regression results indicate that the adoption of profit sharing is associated with a 2 5 4 2 percent increase in productivity in addition the size of the effect increases with the proportion of employees participating in profit sharing these results hold under a variety of specifications and do not appear to be explained by accompanying changes in management or personnel policies copyright 1992 by royal economic society

profit sharing and productivity an analysis of uk engineering firms this paper reports productivity differentials of 3 8 percent in favor of profit sharing firms in the u k engineering industry the estimates come from equations in which profit sharing interacts with factor input levels and the firms technological organizational and labor force characteristics and imply more than a simple incentive effect on work effort or more cooperative behavior in given circumstances a technological labor relations interpretation of the origin of the gains is suggested which are found to be asymmetrically distributed the results question policy measures to encourage profit sharing that do not take account of its significance in the process of organizational design copyright 1989 by royal economic society

unions wages and productivity some evidence from uk engineering firms estimates of union wage and productivity effects are derived using primary micro level panel data for a sample of firms in the uk engineering industry union wage differentials of the order of 10 are suggested from the results whereas union productivity impacts appear to be non linear with respect to union density

on the marginal welfare cost of taxation this paper develops a rigorous partial equilibrium analysis of the determinants of margin al welfare cost mwc of taxes on labor earnings it shows that four key parameters interact to determine the magnitude of mwc using aggregate data and plausible ranges of values for the parameters mwc can vary from under 10 percent to more than 300 percent of marginal tax revenue intermediate parameter values sugge st mwc is in the 25 50 percent range however the more extreme estimates cannot be ruled out on the basis of available evidence suggesting that mwc cannot yet be copyright 1987 by american economic association

on non uniqueness in rational expectations models an attempt at perspective abstract many macroeconomic models involving rational expectations give rise to an infinity of solution paths even when the models are linear in all variables some writers have suggested that this non uniqueness constitutes a serious weakness for the rational expectations hypothesis one purpose of the present paper is to argue that the non uniqueness in question is not properly attributable to the rationality hypothesis but instead is a general feature of dynamic models involving expectations it is also argued that there typically exists in a very wide class of linear rational expectations models a single solution that excludes bubble or bootstrap effects one that occur only because they are arbitrarily expected to occur a systematic procedure for obtaining solutions free from such effects is introduced and discussed in addition this procedure is used to interpret and reconsider several prominent examples with solution multiplicities including ones developed by fischer black and john b taylor

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

monetary fiscal policy interactions and fiscal stimulus abstract increases in government spending trigger substitution effects both inter and intra temporal and a wealth effect the ultimate impacts on the economy hinge on current and expected monetary and fiscal policy behavior studies that impose active monetary policy and passive fiscal policy typically find that government consumption crowds out private consumption higher future taxes create a strong negative wealth effect while the active monetary response increases the real interest rate this paper estimates markov switching policy rules for the united states and finds that monetary and fiscal policies fluctuate between active and passive behavior when the estimated joint policy process is imposed on a conventional new keynesian model government spending generates positive consumption multipliers in some policy regimes and in simulated data in which all policy regimes are realized the paper reports the model s predictions of the macroeconomic impacts of the american recovery and reinvestment act s implied path for government spending under alternative monetary fiscal policy combinations

fiscal multipliers under an interest rate peg of deterministic versus stochastic duration this paper revisits the size of the fiscal multiplier the experiment is a fiscal expansion under the assumption of a pegged nominal rate of interest we demonstrate that a quantitatively important issue is the articulation of the exit from the policy experiment if the monetary fiscal expansion is stochastic with a mean duration of t periods the fiscal multiplier can be unboundedly large however if the monetary fiscal expansion is for a fixed t periods the multiplier is much smaller our explanation rests on a jensen s inequality type argument the deterministic multiplier is convex in duration and the stochastic multiplier is a weighted average of the deterministic multipliers the quantitative difference in the two multipliers also arises in a model with capital and in the baseline nonlinear model however the differences between the two is less pronounced in the nonlinear models

spending reversals and fiscal multipliers under an interest rate peg this paper examines whether fiscal stimuli are more effective when the monetary policy is less responsive to inflation first we provide empirical evidence suggesting that in the period of u s passive monetary policy a positive government spending shock was followed over time by a spending cut second our theoretical analysis reveals that the pegged nominal interest rate is not a sufficient condition to generate a large fiscal multiplier an increase in government spending could increase the long run real interest rate if it is associated with a government spending reversal and a less responsive monetary policy consequently the response of private consumption can be negative and the government spending multiplier is not necessarily greater than 1

profit related pay and the u k small firm labour market this paper critically examines the relevance of profit related pay prp for the u k small firm sector since 1986 the u k government has actively encouraged prp which attracts generous tax breaks because it believed that prp would make pay more flexible downwards and would significantly improve employee identification morale and productivity an analysis of the theoretical arguments and the assumptions made regarding the nature of the u k small firm sector that underlay these claims suggests however that the likelihood of achieving either of these alleged benefits is small an appraisal of the available empirical evidence on the practical implementation and operation of prp schemes suggests that the tax relief simply encourages firms to introduce cosmetic schemes that have no appreciable impact upon the behaviour of either firms or employees moreover the experience of some firms that adopted prp schemes indicates that far from increasing morale and productivity prp often creates new tensions and conflict between owners and employees these and other unintended consequences illustrate the inherent difficulties of government attempts to use the tax system to alter the behaviour of agents engaged in a wide variety of complex and very heterogeneous bargaining situations

economic and political foundations of tax structure this paper derives the essential elements of tax systems as the outcome of rational behavior in a model w here government maximizes expected support and where opposition to ta xation depends on the loss in full income the analysis treats the le vel of expenditures as endogenous and integrates the influence of adm inistration costs with that of political and economic factors tax st ructure is shown to be a system of related components in equilibrium a final section compares results to two alternative approaches opti mal taxation and the leviathan model copyright 1988 by american economic association

evidence on incentive effects of subjective performance evaluations the authors investigate the effect of managerial performance evaluation styles on employee work effort using panel data on 4 080 employees in a swiss unit of an international company for the period 1999 2002 they test two hypotheses using paid and unpaid overtime work as effort indicators the company applies two performance based remuneration mechanisms an individual surprise bonus and one in which salary is affected by the extent to which an individual has reached personalized targets the authors hypothesize that effort is higher in departments in which individual performance evaluations are more flexible over time as well as when surprise bonuses are used more frequently both hypotheses are supported and the estimated effects are substantial increases in rating flexibility or bonus payments by one standard deviation above the mean increase average overtime hours by more than 20 the findings are robust and suggest that surprise bonuses and flexible performance evaluations over time provide ef

the productivity effects of bank mergers evidence from the uk building societies abstract this paper presents an empirical investigation of the impact of acquisition activity on financial intermediary productivity specifically it uses an augmented production function approach to investigate the impact of acquisition after controls for input changes the model is estimated on an unbalanced panel of 93 uk building societies over the period 1981 1993 using data on their core financial intermediation activities which it is suggested are particularly appropriate for our purposes in contrast to much of the existing merger literature which for the most part uses financial performance data our results do indicate significant and substantial productivity gains following acquisition these are consistent with an acquisitions process in which less efficient firms are acquired and reorganized the post merger gains appear to increase substantially in the post deregulation period when pressures to minimize cost are widely considered to have increased

has monetary policy become more effective we investigate the implications of changes in the structure of the u s economy for monetary policy effectiveness estimating a vector autoregression over the pre and post 1980 periods we provide evidence of a reduced effect of monetary policy shocks in the latter period we estimate a structural model that replicates well the economy s response in both periods and perform counterfactual experiments to determine the source of the change in the monetary transmission mechanism and in the economy s volatility we find that by responding more strongly to inflation expectations monetary policy has stabilized the economy more effectively in the post 1980 period

are government spending multipliers greater during periods of slack evidence from 20th century historical data a key question that has arisen during recent debates is whether government spending multipliers are larger during periods of slack some researchers and policymakers have argued that while government spending multipliers are estimated to be modest on average they might become greater during times when resources are underutilized auerbach and gorodnichenko 2012 forthcoming henceforth ag test this hypothesis and find larger multipliers dur

on the choice of incentives in firms abstract simple models of individual and group incentives under uncertainty are compared and comparative performance is shown to depend upon various exogenous parameters the incentive effects of profit sharing will thus vary with organizational and other characteristics that may be difficult to observe and attempts to quantify productivity effects that neglect selection bias are likely to be misspecified significant selection effects are found in previously used firm level data and productivity effects of existing profit sharing are found to be much larger than potential effects in firms without sharing arrangements this throws doubt on policies to encourage sharing in isolation

fiscal stimulus with spending reversals abstract the short run effects of fiscal policy depend not only on current tax and spending choices but also on expectations about future policy adjustment while general equilibrium models typically restrict medium term adjustment to taxation we highlight the importance of government spending dynamics first we provide time series evidence for the united states suggesting that an exogenous increase in government spending prompts a rise in public debt followed over time by a reduction in spending below trend second we show how expected spending reversals alter the short run impact of fiscal policy in a new keynesian model bringing it closer in line with the evidence

is there a fiscal free lunch in a liquidity trap this paper uses a dsge model to examine the eects of an expansion in government spending in a liquidity trap the spending multiplier can be much larger than in the normal situation if the liquidity trap is very persistent and scal stimulus can be rapidly implemented moreover the budgetary costs may be minimal as the large response of output boosts tax revenues allowing for something close to a scal free lunch however we caution that the multiplier may be much smaller under plausible implementation lags for many types of public spending and or if the liquidity trap lasts less than two years in addition because the marginal impact of scal expansion decreases in the scale of the outlay it is crucial to distinguish between average and marginal multipliers

a positive model of tax reform this paper is devoted to the explanation of tax policy from a behavioural theoretic point of view it for the first time brings together within a unified framework behavioural determinants of government expenditure taxation and tax reform administrative and compliance costs associated with taxation factors generally neglected in models of taxation as well as tax avoidance evasion deadweight losses and the costs that are involved in the tax reform process itself play a crucial role in the model the paper investigates how these factors influence the development of taxation and expenditure and the occurrence of tax reform