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Lump-Sum Payments and Profit-Sharing Plans in the Union Sector of the United States Economy


  • Bell, Linda A
  • Neumark, David


Lump-sum payments and profit-sharing plans became increasingly prevalent in union contracts in the U.S. economy in the 1980s. This paper analyzes the relationship between lump-sums, profit sharing, labor costs and employment, in firm-level panel data for the union sector of the U.S. economy. In general, the firm-level data suggest that profit sharing has a statistically significant effect of lowering labor cost growth. Profit sharing also appears to increase employment growth and reduce employment variability, but these results are not statistically significant. This evidence is generally consistent with hypotheses regarding the introduction of performance-related pay (Weitzman, 1984 and 1985). The effects of lump-sums, on the other hand, are not consistent with hypotheses regarding performance-related pay. Lump-sums do not appear to lower labor cost growth or increase employment growth, and increase rather than decrease employment variability. Copyright 1993 by Royal Economic Society.

Suggested Citation

  • 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, vol. 103(418), pages 602-619, May.
  • Handle: RePEc:ecj:econjl:v:103:y:1993:i:418:p:602-19

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    References listed on IDEAS

    1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    2. Ermisch, John & Westaway, Peter, 1994. "The Dynamics of Aggregate Consumption in an Open Economy Life Cycle Model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(2), pages 113-127, May.
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    Cited by:

    1. Noélie Delahaie & Richard Duhautois, 2015. "Profit-Sharing and Wages: An Empirical Analysis Using French Data Between 2000 and 2007," Working Papers halshs-01143491, HAL.
    2. Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1994. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Economics Working Paper Archive wp_125, Levy Economics Institute.
    3. Kraft, Kornelius & Ugarkovic, Marija, 2006. "Profit sharing and the financial performance of firms: Evidence from Germany," Economics Letters, Elsevier, vol. 92(3), pages 333-338, September.
    4. repec:sbe:breart:v:15:y:1995:i:2:a:2886 is not listed on IDEAS
    5. Rick Harbaugh, "undated". "Employee Stock Ownership vs. Profit Sharing," Claremont Colleges Working Papers 2000-28, Claremont Colleges.
    6. Hamid Mehran & Joseph Tracy, 2001. "The effect of employee stock options on the evolution of compensation in the 1990s," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 17-34.
    7. Lars Calmfors & Giancarlo Corsetti & Seppo Honkapohja & John Kay & Willi Leibfritz & Gilles Saint-Paul & Hans-Werner Sinn & Xavier Vives, 2004. "Pay-setting Systems in Europe: On-going Development and Possible Reforms," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 61-83, October.
    8. Cecilia Navarra & Ermanno Tortia, 2014. "Employer Moral Hazard, Wage Rigidity, and Worker Cooperatives: A Theoretical Appraisal," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(3), pages 707-726.
    9. Douglas L. Kruse, 1993. "Does Profit Sharing Affect Productivity?," NBER Working Papers 4542, National Bureau of Economic Research, Inc.
    10. Noélie Delahaie & Richard Duhautois, 2013. "L'impact des dispositifs collectifs de partage des bénéfices sur les rémunérations en France. Une analyse empirique sur la période 1999-2007," Working Papers halshs-00967479, HAL.
    11. Long, Richard J. & Fang, Tony, 2012. "Do Employees Profit from Profit Sharing? Evidence from Canadian Panel Data," IZA Discussion Papers 6749, Institute for the Study of Labor (IZA).
    12. Leila Baghdadi & Rihab Bellakhal & Marc-Arthur Diaye, 2012. "Do French firms use financial participation to transfer more risk to their workers?," Documents de recherche 12-10, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    13. Kauhanen, Antti & Piekkola, Hannu, 2002. "Profit Sharing in Finland: Earnings and Productivity Effects," Discussion Papers 817, The Research Institute of the Finnish Economy.
    14. Douglas Kruse & Joseph Blasi, 1995. "Employee Ownership, Employee Attitudes, and Firm Performance," NBER Working Papers 5277, National Bureau of Economic Research, Inc.
    15. Cardoso, Renato Fragelli, 1995. "Profit sharing with heterogeneous entrepreneurial prowess," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 265, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    16. Cardoso, Renato Fragelli, 1997. "Mandatory profit sharing, entrepreneurial incentives and capital accumulation," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 318, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    17. Pablo González, 2002. "Profit Sharing Reconsidered: Efficiency Wages and Renegotiation Costs," Documentos de Trabajo 151, Centro de Economía Aplicada, Universidad de Chile.
    18. Frank Scharr, 2005. "Tarifbindung, Rententeilung und Konzessionsverträge als Einflussgrößen der Lohnhöhe in Unternehmen : eine Untersuchung mit Mikrodaten für thüringische Firmen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 39, October.

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