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Public Profit Sharing

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  • Ronnie Schöb

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 share 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.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-05/cesifo_wp489.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 489.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_489

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Related research

Keywords: Public profit sharing; trade unions; unemployment; labour market reform;

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References

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  1. Agell, J., 2000. "On the Determinants of Labour Market Institutions: Rent-sharing vs. Social Insurance," Papers 2000:16, Uppsala - Working Paper Series.
  2. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
  3. Andrew Oswald, 1984. "Efficient Contracts are on the Labour Demand Curve: Theory and Facts," Working Papers 555, Princeton University, Department of Economics, Industrial Relations Section..
  4. Agell, J., 1998. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Papers 1998:17, Uppsala - Working Paper Series.
  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. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  8. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
  9. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  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. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  12. 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.
  13. Holmlund, Bertil, 1990. "Profit Sharing, Wage Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 257-68, April.
  14. Martin L. Weitzman, 1984. "The Simple Macroeconomics of Profit Sharing," Working papers 357, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. 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.
  16. Weitzman, Martin L, 1983. "Some Macroeconomic Implications of Alternative Compensation Systems," Economic Journal, Royal Economic Society, vol. 93(372), pages 763-83, December.
  17. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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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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