Profit Sharing, Wage Bargaining, and Unemployment
AbstractThis paper examines the effects of profit sharing in an economy with decentralized wage bargaining. Profit sharing makes workers' income more sensitive to wage changes, and this leads to wage moderation. But economywide profit sharing may also improve workers' outside income opportunities, and this strengthens the union's hand in bargaining and tends to raise wages. It turns out that equilibrium unemployment is reduced by profit sharing as long as the elasticity of substitution between labor and capital is less than one, whereas unemployment is increased if the elasticity of substitution is greater than one. Copyright 1990 by Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 28 (1990)
Issue (Month): 2 (April)
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- Schob, Ronnie, 2002.
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- Koskela, Erkki & König, Jan, 2011. "The Role of Profit Sharing in Dual Labour Markets with Flexible Outsourcing," IZA Discussion Papers 5798, Institute for the Study of Labor (IZA).
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- Erkki Koskela & Rune Stenbacka, 2004. "Equilibrium unemployment under negotiated profit sharing," Labor and Demography 0404009, EconWPA.
- Koskela, Erkki & Stenbacka, Rune, 2004. "Profit Sharing, Credit Market Imperfections and Equilibrium Unemployment," IZA Discussion Papers 1020, Institute for the Study of Labor (IZA).
- Koskela, Erkki & Stenbacka, Rune, 2003. "Profit Sharing and Unemployment: An Approach with Bargaining and Efficiency Wage Economics," Discussion Papers 863, The Research Institute of the Finnish Economy.
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