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The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data

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Author Info

  • Kato, Takao

    ()
    (Colgate University)

  • Lee, Ju Ho

    ()
    (KDI School of Public Policy and Management)

  • Ryu, Jang-Soo

    ()
    (Pukyong National University)

Abstract

We report the first results for Korean firms on the incidence, diffusion, scope and effects of diverse employee financial participation schemes, such as Profit Sharing Plans (PSPs), Employee Stock Ownership Plans (ESOPs), Stock Option Plans (SOPs) and Team Incentive Plans (TIPs). In do doing, we assemble important new panel data by merging data from a survey of all Korean firms listed on Korean Stock Exchange which enjoys an unusually high response rate of 60 percent with accounting data from their corporate proxy statements. Our estimated fixed effect models of production functions reveal consistently that the introduction of a PSP or a TIP will lead to a significant increase in productivity (about 10 percent) whereas no such evidence found for ESOPs or SOPs. We also find that the productivity payoff appears to be more long-lasting for PSPs than for TIPs. Finally, our fixed-effect estimates suggest that PSPs and TIPs tend to be substitutes rather than complements in their productivity effects.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5111.

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Length: 31 pages
Date of creation: Aug 2010
Date of revision:
Publication status: published in: Tor Eriksson (ed.), Advances in the Economic Analysis of Participatory and Labor-Managed Firms Volume 11, Bingley: Emerald, 2010
Handle: RePEc:iza:izadps:dp5111

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Keywords: Korea; profit sharing; productivity; stock option; team incentive; employee stock ownership;

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References

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  1. Martin J. Conyon & Richard B. Freeman, 2001. "Shared Modes of Compensation and Firm Performance: UK Evidence," NBER Working Papers 8448, National Bureau of Economic Research, Inc.
  2. Wadhwani, S. & Wall, M., 1988. "The Effects Of Profit-Sharing On Employment, Wages, Stock Returns And Productivity: Evidence From Uk Micro-Data," Papers, London School of Economics - Centre for Labour Economics 311, London School of Economics - Centre for Labour Economics.
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  9. Cin, Beom-cheol & Smith, Stephen C, 2002. "Employee Stock Ownership and Participation in South Korea: Incidence, Productivity Effects, and Prospects," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 6(2), pages 263-83, June.
  10. Takao Kato & Ju HO Lee & Kang-sung Lee & Jang-soo Ryu, 2005. "Employee participation and involvement in korea: evidence from a new survey and field research," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 19(2), pages 251-281.
  11. Takao Kato, 2003. "The Recent Transformation of Participatory Employment Practices in Japan," NBER Chapters, National Bureau of Economic Research, Inc, in: Labor Markets and Firm Benefit Policies in Japan and the United States, pages 39-80 National Bureau of Economic Research, Inc.
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  14. Richard B. Freeman & Morris M. Kleiner & Cheri Ostroff, 2000. "The Anatomy of Employee Involvement and Its Effects on Firms and Workers," NBER Working Papers 8050, National Bureau of Economic Research, Inc.
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  16. Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1994. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Economics Working Paper Archive, Levy Economics Institute wp_125, Levy Economics Institute.
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Cited by:
  1. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2013. "Wages and Labour Productivity: the role of Performance-Related Pay in Italian firms," MPRA Paper 52126, University Library of Munich, Germany.

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