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Determinants of Profit Sharing in the Finnish Sector

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Author Info

  • Arrantz-Aperte, Laura

    ()
    (Swedish School of Economics and Business Administration)

  • Heshmati, Almas

    ()
    (The United Nations University, World Institute for Development Economics Research)

Abstract

This study investigates the role of factors that determine individual employee’s and firms participation in profit sharing schemes. Using a large panel data of Finnish employees for the period 1996-2000 we analyse individual and workplace characteristics that make firms employ profit sharing schemes and workers susceptible of receiving profit sharing bonuses. In particular two links between profit sharing schemes and workers performance have been analysed. First, in looking at profit sharing as an incentive device the results show a positive link between firm size and monitoring costs. Second, we find that younger individuals with higher mean salary and capacity to bear risk are more susceptible to profit sharing schemes. The industrial sector in which the individual is employed is also an important determinant factor. We find weak evidence of a relationship between performance of firms and employment of profit sharing schemes at the industrial sector level.

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Bibliographic Info

Paper provided by Hanken School of Economics in its series Working Papers with number 492.

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Length: 32 pages
Date of creation: 27 Nov 2003
Date of revision:
Handle: RePEc:hhb:hanken:0492

Contact details of provider:
Postal: Hanken School of Economics, Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland
Phone: +358-9-431 331
Fax: +358-9-431 33 333
Web page: http://www.hanken.fi
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Keywords: individual; firm; profit sharing; panel data;

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  1. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  2. Charles Brown, 1990. "Firms' choice of method of pay," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 165-182, February.
  3. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
  4. Kölling, Arnd & Schnabel, Claus & Wagner, Joachim, 2002. "Establishment Age and Wages: Evidence from German Linked Employer-Employee Data," IZA Discussion Papers 679, Institute for the Study of Labor (IZA).
  5. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  6. David Margolis & Kjell G, Salvanes, 2001. "Do Firms Really Share Rents with their Workers," Working Papers 2001-16, Centre de Recherche en Economie et Statistique.
  7. Cahuc, Pierre & Dormont, Brigitte, 1997. "Profit-sharing: Does it increase productivity and employment? A theoretical model and empirical evidence on French micro data," Labour Economics, Elsevier, vol. 4(3), pages 293-319, September.
  8. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  9. Bauer, Thomas K., 2003. "Flexible Workplace Practices and Labor Productivity," IZA Discussion Papers 700, Institute for the Study of Labor (IZA).
  10. FitzRoy, Felix R & Kraft, Korenelius, 1987. "Cooperation, Productivity, and Profit Sharing," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 23-35, February.
  11. David Margolis & Kjell G, Salvanes, 2001. "Do Firms Really Share Rents with their Workers," Working Papers 2001-16, Centre de Recherche en Economie et Statistique.
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