Profit Sharing, Risk Sharing, and Firm Size: Implications of Efficiency Wages
By taking account of output fluctuations, this paper constructs a synthesis of profit-sharing and efficiency-wage models to highlight the role of the risk attitudes of the firm and its employees. We show, contrary to the traditional efficiency wage theory, that in a profit-sharing economy unemployment is no longer a necessary device to induce work effort and, consequently, the labor market equilibrium may be characterized by full employment. Such a result is more likely to be true when the economy is characterized by small-sized firms. In addition, we also provide a preliminary sketch of the situations in which the firm chooses a profit-sharing program or a fixed-wage one, and discuss how a firm determines its pay parameters and employment in response to output fluctuations. Copyright Springer 2006
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- Douglas L. Kruse, 1993. "Does Profit Sharing Affect Productivity?," NBER Working Papers 4542, National Bureau of Economic Research, Inc.
- Martin J. Conyon & Richard Freeman, 2002.
"Shared Modes of Compensation and Firm Performance: UK Evidence,"
CEP Discussion Papers
dp0560, Centre for Economic Performance, LSE.
- Martin Conyon & Richard B. Freeman, 2004. "Shared Modes of Compensation and Firm Performance U.K. Evidence," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 109-146 National Bureau of Economic Research, Inc.
- 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.
- Martin J. Conyon & Richard B. Freeman, 2002. "Shared modes of compensation and firm performance: UK evidence," LSE Research Online Documents on Economics 20060, London School of Economics and Political Science, LSE Library.
- Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, December.
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