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Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects

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  • Derek C. Jones
  • Takao Kato
  • Jeffrey Pliskin

Abstract

The slowdown in productivity growth since the 1970s has led to increased interest in alternative compensation schemes—such as profit sharing and gainsharing—that might raise worker productivity and reduce turnover. In this working paper, Jones, Kato, and Pliskin summarize the rise in popularity of profit sharing (PS) and gainsharing (GS) plans; review existing theoretical and empirical work on PS and GS; and highlight findings that relate the effectiveness of such programs at raising productivity and enhancing employment stability. They also note that some existing studies contain some econometric problems relating to plan and model variables; there are measurement problems as well. Their paper primarily focuses on PS plans.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_125.

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Date of creation: Sep 1994
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Handle: RePEc:lev:wrkpap:wp_125

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References

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  1. Kandel, E. & Lazear, E.P., 1990. "Peer Pressure and Partnerships," Papers, Rochester, Business - Managerial Economics Research Center 90-07, Rochester, Business - Managerial Economics Research Center.
  2. Kumbhakar, Subal C. & Dunbar, Amy E., 1993. "The elusive ESOP--productivity link : evidence from U.S. firm-level data," Journal of Public Economics, Elsevier, Elsevier, vol. 52(2), pages 273-283, September.
  3. Edward P. Lazear, 1991. "Labor Economics and the Psychology of Organizations," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 5(2), pages 89-110, Spring.
  4. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers, UCLA Department of Economics 10A, UCLA Department of Economics.
  5. Tracy, Joseph, 1986. "Unions and the share economy," Journal of Comparative Economics, Elsevier, vol. 10(4), pages 433-437, December.
  6. Freeman, Richard B. & Weitzman, Martin L., 1987. "Bonuses and employment in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 1(2), pages 168-194, June.
  7. Douglas L. Kruse, 1991. "Profit-sharing and employment variability: Microeconomic evidence on the Weitzman theory," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(3), pages 437-453, April.
  8. Derek C. Jones & Takao Kato, 1993. "The scope, nature, and effects of employee stock ownership plans in Japan," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(2), pages 352-367, January.
  9. Brunello, G., 1989. "Bonuses, Wages And Performance In Japan: Evidence From Micro Data," Papers, London School of Economics - Centre for Labour Economics 359, London School of Economics - Centre for Labour Economics.
  10. FitzRoy, Felix R & Kraft, Kornelius, 1986. "Profitability and Profit-Sharing," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(2), pages 113-30, December.
  11. Blanchflower, David G & Oswald, Andrew J, 1987. "Profit Sharing--Can It Work?," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 1-19, March.
  12. James R. Chelius & Robert S. Smith, 1990. "Profit sharing and employment stability," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 43(3), pages 256-273, February.
  13. Takatoshi Ito, 1991. "The Japanese Economy," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262090295, December.
  14. S Estrin & D Jones, 1992. "The Determinants of Investment in Employee Owned Firms: Evidence from France," CEP Discussion Papers, Centre for Economic Performance, LSE dp0087, Centre for Economic Performance, LSE.
  15. Roger T. Kaufman, 1992. "The effects of IMPROSHARE on productivity," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 45(2), pages 311-322, January.
  16. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 52(4), pages 469-506, October.
  17. Bell, Linda A & Neumark, David, 1993. "Lump-Sum Payments and Profit-Sharing Plans in the Union Sector of the United States Economy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(418), pages 602-19, May.
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Cited by:
  1. 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.
  2. Takao Kato, . "Cooperate to Compete, Employee Participation and Productivity: Evidence from a New Survey of Japanese Firms," Economics Public Policy Brief Archive ppb_19, Levy Economics Institute.
  3. Jones, Derek C. & Kalmi, Panu & Mäkinen, Mikko, 2004. "The Determinants of Stock Option Compensation: Evidence from Finland," Discussion Papers, The Research Institute of the Finnish Economy 957, The Research Institute of the Finnish Economy.
  4. Douglas L. Kruse & Joseph R. Blasi & Richard B. Freeman, 2012. "Does Linking Worker Pay to Firm Performance Help the Best Firms Do Even Better?," NBER Working Papers 17745, National Bureau of Economic Research, Inc.
  5. Kato, Takao & Lee, Ju Ho & Ryu, Jang-Soo, 2010. "The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data," IZA Discussion Papers 5111, Institute for the Study of Labor (IZA).
  6. Joseph R. Blasi & Richard B. Freeman & Christopher Mackin & Douglas L. Kruse, 2010. "Creating a Bigger Pie? The Effects of Employee Ownership, Profit Sharing, and Stock Options on Workplace Performance," NBER Chapters, National Bureau of Economic Research, Inc, in: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, pages 139-165 National Bureau of Economic Research, Inc.

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