Profit-Sharing as Tax Saving and Incentive Device
AbstractThe theory of labor contract with worker’s chosen effort level mainly rests upon the principal-agent paradigm. In many labor markets however, the principal is not as free as assumed in the standard theory, but is submitted to some binding institutional constraints. It is requested in particular to post a wage level, i.e. a non random component of compensation to which high rates of social contribution may apply. The proposed model adapts the standard analysis to situations in which tax rules and possibly predetermined profit-sharing patterns interfere with free contracting. It formalizes the two-faced aspect of profit sharing having an impact on the firm’s objective through tax saving effect and incentive effect.
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Bibliographic InfoPaper provided by ESSEC Research Center, ESSEC Business School in its series ESSEC Working Papers with number DR 04012.
Length: 24 pages
Date of creation: Oct 2004
Date of revision:
Profit-sharing; Incentives; Tax evasion;
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-02 (All new papers)
- NEP-BEC-2004-12-02 (Business Economics)
- NEP-LAW-2004-12-02 (Law & Economics)
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