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Basic Models

In: Share Systems and Unemployment

Author

Listed:
  • Franco Cugno

    (University of Torino)

  • Mario Ferrero

    (University of Trieste)

Abstract

In this chapter we want to describe and appraise the working of a few basic types of share compensation schemes. To this purpose, we start with a classification that appears to encompass the full range of feasible types consistent with the definition of a share system we posited in Chapter 1, to the exclusion of (i) wage-discriminating arrangements à la Meade (see Chapter 9), and (ii) the free-access system (see Chapter 4). Here, then, we focus on arrangements in which equal pay for equal work prevails, workers share only in the firm’s current income, and employment and investment decisions are made by the firm alone. To put it differently, in this chapter we keep within the boundaries of Weitzman’s (1983, 1984, 1985) world, in which information is perfect, workers are neutral toward risk, insider workers have no greater bargaining power than outsiders, and the only hindrance to full employment is the existence of periodically negotiated employment contracts which fix labour compensation parameters for the time period spanned by the contract. Following Weitzman, we distinguish a ‘short’ run in which compensation parameters are quasi-fixed and only employment adjusts, and a ‘long’ run (still included, however, within the Marshallian short run, since the capital stock in every firm and the number of firms in every industry are given) in which compensation parameters are also free to adjust.

Suggested Citation

  • Franco Cugno & Mario Ferrero, 1991. "Basic Models," Palgrave Macmillan Books, in: Share Systems and Unemployment, chapter 3, pages 11-33, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-11530-3_3
    DOI: 10.1007/978-1-349-11530-3_3
    as

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