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Efficiency Aspects of Profit-Sharing Systems versus Wage Systems

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  • James R. Markusen

Abstract

Some theoretical and practical bases for choosing between wage and profit-sharing reward structures are considered. The analysis suggests that simple wage systems have theoretical advantages over simple profit-sharing systems with regard to the optimal provision of labor effort. The opposite conclusion occurs with regard to the optimal use of capital. Furthermore, simple profit-sharing systems are better able to deal with certain practical problems that arise in large-scale agricultural production. Finally, a complex type of profit sharing exists which has the same theoretical advantages as the wage system plus practical advantages as well.

Suggested Citation

  • James R. Markusen, 1975. "Efficiency Aspects of Profit-Sharing Systems versus Wage Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(4), pages 601-612.
    • Handle: RePEc:oup:ajagec:v:57:y:1975:i:4:p:601-612.
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    File URL: http://hdl.handle.net/10.2307/1238878
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    Cited by:

    1. Robert Hyde & James R. Markusen, 1982. "Exploration Versus Extraction Costs as Determinants of Optimal Mineral‐Rights Leases," The Economic Record, The Economic Society of Australia, vol. 58(3), pages 224-234, September.

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