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Does profit sharing reduce conflict with the boss? Evidence from Germany


  • John Heywood
  • Uwe Jirjahn
  • Georgi Tsertsvadze


This paper argues that, in general, profit sharing aligns the interests of workers and the firm and that this alignment reduces the extent of conflict between workers and management. This paper also argues that this general result will not carry over to the workers least able to respond to the alignment of interests with greater effort and that it will not apply to supervisors. After describing the German use of profit sharing, we use German data to show that for non-supervisory workers in excellent health, profit sharing reduces conflict but that for those who are not in excellent health and for supervisors, profit sharing does not reduce conflict. We also show that independent from profit sharing, conflict with the boss is greater for the aged and for those not in excellent health.

Suggested Citation

  • John Heywood & Uwe Jirjahn & Georgi Tsertsvadze, 2005. "Does profit sharing reduce conflict with the boss? Evidence from Germany," International Economic Journal, Taylor & Francis Journals, vol. 19(2), pages 235-250.
  • Handle: RePEc:taf:intecj:v:19:y:2005:i:2:p:235-250 DOI: 10.1080/10168730500080741

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    References listed on IDEAS

    1. Heywood, John S & Hubler, Olaf & Jirjahn, Uwe, 1998. "Variable Payment Schemes and Industrial Relations: Evidence from Germany," Kyklos, Wiley Blackwell, vol. 51(2), pages 237-257.
    2. Rotemberg, Julio J, 1994. "Human Relations in the Workplace," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 684-717, August.
    3. Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters,in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52 National Bureau of Economic Research, Inc.
    4. John S. Heywood & Uwe Jirjahn & Georgi Tsertsvadze, 2005. "Getting along with Colleagues - Does Profit Sharing Help or Hurt?," Kyklos, Wiley Blackwell, vol. 58(4), pages 557-573, November.
    5. John S. Heywood & Uwe Jirjahn, 2002. "Payment Schemes and Gender in Germany," ILR Review, Cornell University, ILR School, vol. 56(1), pages 44-64, October.
    6. Laffont, Jean-Jacques, 1990. "Analysis of Hidden Gaming in a Three-Level Hierarchy," Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(2), pages 301-324, Fall.
    7. Kruse, Douglas & Blasi, Joseph & Freeman, Richard B., 2004. "Monitoring colleagues at work: profit-sharing, employee ownership, broad-based stock options and workplace performance in the United States," LSE Research Online Documents on Economics 19943, London School of Economics and Political Science, LSE Library.
    8. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    9. repec:mes:challe:v:38:y:1995:i:3:p:53-56 is not listed on IDEAS
    10. Knez, Marc & Simester, Duncan, 2001. "Firm-Wide Incentives and Mutual Monitoring at Continental Airlines," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 743-772, October.
    11. Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, November.
    12. FitzRoy, Felix R & Kraft, Kornelius, 1986. "Profitability and Profit-Sharing," Journal of Industrial Economics, Wiley Blackwell, vol. 35(2), pages 113-130, December.
    13. Prendergast, Canice & Topel, Robert, 1993. "Discretion and bias in performance evaluation," European Economic Review, Elsevier, vol. 37(2-3), pages 355-365, April.
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    Cited by:

    1. John S. Heywood & Uwe Jirjahn, 2014. "Variable Pay, Industrial Relations and Foreign Ownership: Evidence from Germany," British Journal of Industrial Relations, London School of Economics, vol. 52(3), pages 521-552, September.
    2. Colin P. Green & John S. Heywood, 2016. "Don't Forget the Gravy! Are Bonuses Just Added on Top of Salaries?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(3), pages 490-513, July.
    3. Green, Colin P. & Heywood, John S., 2010. "Profit sharing and the quality of relations with the boss," Labour Economics, Elsevier, vol. 17(5), pages 859-867, October.
    4. repec:lan:wpaper:3175 is not listed on IDEAS
    5. C Green & J S Heywood, 2007. "Performance pay, sorting and the dimensions of job satisfaction," Working Papers 584041, Lancaster University Management School, Economics Department.
    6. Jirjahn Uwe & Tsertsvadze Georgi, 2006. "Betriebsräte und Arbeitszufriedenheit / Works Councils and Job Satisfaction," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 226(5), pages 537-561, October.
    7. repec:lan:wpaper:2928 is not listed on IDEAS
    8. repec:lan:wpaper:3020 is not listed on IDEAS


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