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Public Profit Sharing

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  • Schob, Ronnie

Abstract

Many countries suffer from persistently high unemployment rates. The scope for labour market reforms is often limited to measures that hurt neither shareholders nor workers. This paper develops a policy proposal, which allows the government to reduce wage costs without changing the income positions as determined in the process of wage negotiations. It is shown that the introduction of public profit sharing, i.e., substituting profit shares for social security contributions, can boost employment both in the short run and the long run. Calibrating the model and comparing the results with recent empirical findings about the impact of labour taxation confirm the theoretical findings. Copyright 2002 by WWZ and Helbing & Lichtenhahn Verlag AG

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Kyklos.

Volume (Year): 55 (2002)
Issue (Month): 4 ()
Pages: 523-41

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Handle: RePEc:bla:kyklos:v:55:y:2002:i:4:p:523-41

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References

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  1. Weitzman, Martin L, 1985. "The Simple Macroeconomics of Profit Sharing," American Economic Review, American Economic Association, vol. 75(5), pages 937-53, December.
  2. Jonas Agell, 2000. "On the Determinants of Labour Market Institutions: Rent-Sharing vs. Social Insurance," CESifo Working Paper Series 384, CESifo Group Munich.
  3. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  4. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  5. Orszag, Mike & Snower, Dennis J., 1998. "Anatomy of Policy Complementarities," CEPR Discussion Papers 1963, C.E.P.R. Discussion Papers.
  6. Simon P. Anderson & Michael Devereux, 1989. "Profit-Sharing and Optimal Labour Contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 425-33, May.
  7. Oswald, Andrew J., 1993. "Efficient contracts are on the labour demand curve : Theory and facts," Labour Economics, Elsevier, vol. 1(1), pages 85-113, June.
  8. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 47-104, 04.
  9. Holmlund, Bertil, 1990. "Profit Sharing, Wage Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 257-68, April.
  10. Layard, Richard & Nickell, Stephen, 1990. "Is Unemployment Lower if Unions Bargain over Employment?," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 773-87, August.
  11. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  12. Eaton, B Curtis & Lipsey, Richard G, 1978. "Freedom of Entry and the Existence of Pure Profit," Economic Journal, Royal Economic Society, vol. 88(351), pages 455-69, September.
  13. Agell, J., 1998. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Papers 1998:17, Uppsala - Working Paper Series.
  14. Weitzman, Martin L, 1983. "Some Macroeconomic Implications of Alternative Compensation Systems," Economic Journal, Royal Economic Society, vol. 93(372), pages 763-83, December.
  15. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  16. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  17. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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Cited by:
  1. Ronnie Schöb, 2001. "Durch »staatliche Gewinnbeteiligung« zu mehr Beschäftigung," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 54(21), pages 11-17, October.

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