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Profit Sharing and Employment Stability

Author

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  • Lutz Bellmann
  • Iris Möller

Abstract

We investigate the effect of profit sharing on establishments’ hirings, layoffs, and quits. Our principal argument is that profit sharing increases wage flexibility and also aligns wages with a changing marginal revenue product. Because employment stability makes their human capital investment more profitable and increases labor productivity and morale, firms might choose to adopt profit-sharing schemes. Our empirical analysis is based on the IAB establishment Panel. We estimate cross-section time-series regressions and apply state-of-the-art matching estimators that explicitly account for observed and unobserved heterogeneity. in the regressions we find a significantly positive effect of profit sharing on hirings and a significantly negative effect on layoffs, but the results obtained by the matching estimators are not significant.

Suggested Citation

  • Lutz Bellmann & Iris Möller, 2010. "Profit Sharing and Employment Stability," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 62(1), pages 73-92, January.
  • Handle: RePEc:sbr:abstra:v:62:y:2010:i:1:p:73-92
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    Cited by:

    1. Antal, Miklós, 2014. "Green goals and full employment: Are they compatible?," Ecological Economics, Elsevier, vol. 107(C), pages 276-286.

    More about this item

    Keywords

    Compensation; Incentives; Labor Turnover; Matching; Profit Sharing;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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