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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. Jonas Agell, 2000. "On the Determinants of Labour Market Institutions: Rent-Sharing vs. Social Insurance," CESifo Working Paper Series 384, CESifo Group Munich.
  2. 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.
  3. Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
  4. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  5. 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.
  6. Layard, R. & Nickell, S., 1988. "Is Unemployment Lower If Unions Bargain Over Employment?," Papers 308, London School of Economics - Centre for Labour Economics.
  7. Orszag, Mike & Snower, Dennis J., 1999. "Anatomy of Policy Complementarities," IZA Discussion Papers 41, Institute for the Study of Labor (IZA).
  8. Martin L. Weitzman, 1984. "The Simple Macroeconomics of Profit Sharing," Working papers 357, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 47-104, 04.
  10. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  11. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
  12. Agell, Jonas, 1999. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Economic Journal, Royal Economic Society, vol. 109(453), pages F143-64, February.
  13. Clark, Andrew E & Oswald, Andrew J, 1994. "Unhappiness and Unemployment," Economic Journal, Royal Economic Society, vol. 104(424), pages 648-59, May.
  14. Holmlund, Bertil, 1990. "Profit Sharing, Wage Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 257-68, April.
  15. Weitzman, Martin L, 1983. "Some Macroeconomic Implications of Alternative Compensation Systems," Economic Journal, Royal Economic Society, vol. 93(372), pages 763-83, December.
  16. 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.
  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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