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Lump-Sum Payments and Profit-Sharing Plans in the Union Sector of the United States Economy

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Author Info
Bell, Linda A
Neumark, David

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Abstract

Lump-sum payments and profit-sharing plans became increasingly prevalent in union contracts in the U.S. economy in the 1980s. This paper analyzes the relationship between lump-sums, profit sharing, labor costs and employment, in firm-level panel data for the union sector of the U.S. economy. In general, the firm-level data suggest that profit sharing has a statistically significant effect of lowering labor cost growth. Profit sharing also appears to increase employment growth and reduce employment variability, but these results are not statistically significant. This evidence is generally consistent with hypotheses regarding the introduction of performance-related pay (Weitzman, 1984 and 1985). The effects of lump-sums, on the other hand, are not consistent with hypotheses regarding performance-related pay. Lump-sums do not appear to lower labor cost growth or increase employment growth, and increase rather than decrease employment variability. Copyright 1993 by Royal Economic Society.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 103 (1993)
Issue (Month): 418 (May)
Pages: 602-19
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Handle: RePEc:ecj:econjl:v:103:y:1993:i:418:p:602-19

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  1. Hamid Mehran & Joseph Tracy, 2001. "The effect of employee stock options on the evolution of compensation in the 1990s," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 17-34. [Downloadable!]
  2. Antti Kauhanen & Hannu Piekkola, 2002. "Profit Sharing in Finland: Earnings and Productivity Effects," Discussion Papers 817, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2004. "Pay-setting Systems in Europe: On-going Development and Possible Reforms," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 61-83, October. [Downloadable!]
  4. Rick Harbaugh, . "Employee Stock Ownership vs. Profit Sharing," Claremont Colleges Working Papers 2000-28, Claremont Colleges. [Downloadable!]
  5. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo 151, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  6. Douglas Kruse & Joseph Blasi, 1995. "Employee Ownership, Employee Attitudes, and Firm Performance," NBER Working Papers 5277, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1999. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Macroeconomics 9903010, EconWPA. [Downloadable!]
  8. Enisse Kharroubi, 2004. "Wages, risk sharing and economic fluctuations," DELTA Working Papers 2004-33, DELTA (Ecole normale supérieure). [Downloadable!]
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