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How Does Shared Capitalism Affect Economic Performance in the UK?

Author

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  • Alex Bryson
  • Richard Freeman

Abstract

This paper uses nationally representative linked workplace-employee data from the British 2004 Workplace Employment Relations Survey to examine the operation of shared capitalist forms of pay - profit-sharing and group pay for performance, employee share ownership, and stock options—and their link to productivity. It shows that shared capitalism has grown in the UK, as it has in the US; that different forms of shared capitalist pay complement each other and other labour practices in the sense that firms use them together more than they would if they chose modes of pay and work practices independently; and that workplaces switch among schemes frequently, which suggests that they have trouble optimizing and the transactions cost of switching are relatively low. Among the single schemes, share ownership has the clearest positive association with productivity, but its impact is largest when firms combine it with other forms of shared capitalist pay and modes of organization.

Suggested Citation

  • Alex Bryson & Richard Freeman, 2008. "How Does Shared Capitalism Affect Economic Performance in the UK?," CEP Discussion Papers dp0885, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0885
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    References listed on IDEAS

    as
    1. 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.
    2. Bryson, Alex & Freeman, Richard B., 2007. "Doing the right thing? does fair share capitalism improve workplace performance," LSE Research Online Documents on Economics 4964, London School of Economics and Political Science, LSE Library.
    3. David Card & Richard Blundell & Richard B. Freeman, 2004. "Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000," NBER Books, National Bureau of Economic Research, Inc, number card04-1, August.
    4. George Baker & Robert Gibbons & Kevin J. Murphy, 1994. "Subjective Performance Measures in Optimal Incentive Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1125-1156.
    5. repec:nsr:niesrd:319 is not listed on IDEAS
    6. Kochan, Thomas A., 1996. "What works at work : overview and assessment," Working papers 3886-96., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Pitfalls in employee ownership
      by chris dillow in Stumbling and Mumbling on 2012-01-17 21:12:23
    2. Framing worker democracy
      by chris dillow in Stumbling and Mumbling on 2012-10-01 19:28:05
    3. Control: Osborne's missing word
      by chris dillow in Stumbling and Mumbling on 2012-10-08 18:56:53
    4. Supply-side socialism
      by chris dillow in Stumbling and Mumbling on 2013-03-11 19:32:11

    Citations

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    Cited by:

    1. Kato, Takao & Lee, Ju Ho & Ryu, Jang-Soo, 2010. "The Productivity Effects of Profit Sharing, Employee Ownership, Stock Option and Team Incentive Plans: Evidence from Korean Panel Data," IZA Discussion Papers 5111, Institute for the Study of Labor (IZA).
    2. KATO Takao & MIYAJIMA Hideaki & OWAN Hideo, 2016. "Does Employee Stock Ownership Work? Evidence from publicly-traded firms in Japan," Discussion papers 16073, Research Institute of Economy, Trade and Industry (RIETI).
    3. David Marsden & Richard Belfield, 2010. "Institutions and the Management of Human Resources: Incentive Pay Systems in France and Great Britain," British Journal of Industrial Relations, London School of Economics, vol. 48(2), pages 235-283, June.
    4. Konstantinos Pouliakas & Nikolaos Theodoropoulos, 2012. "The Effect of Variable Pay Schemes on Workplace Absenteeism," Research in Labor Economics,in: Research in Labor Economics, volume 36, pages 109-157 Emerald Publishing Ltd.
    5. Bryson, Alex & Freeman, Richard B., 2010. "To join or not to join? Factors influencing employee share plan membership in a multinational corporation," LSE Research Online Documents on Economics 48915, London School of Economics and Political Science, LSE Library.
    6. Fali Huang & Peter Cappelli, 2010. "Applicant Screening and Performance-Related Outcomes," American Economic Review, American Economic Association, vol. 100(2), pages 214-218, May.
    7. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2013. "Wages and Labour Productivity: the role of performance-related pay in Italian firms," Quaderni del Dipartimento di Economia, Finanza e Statistica 124/2013, Università di Perugia, Dipartimento Economia.
    8. Natalie Chun & Soohyung Lee, 2015. "Bonus compensation and productivity: evidence from Indian manufacturing plant-level data," Journal of Productivity Analysis, Springer, vol. 43(1), pages 47-58, February.
    9. 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.
    10. Kato, Takao & Kauhanen, Antti, 2013. "Performance Pay and Enterprise Productivity: The Details Matter," ETLA Working Papers 21, The Research Institute of the Finnish Economy.
    11. Leila Baghdadi & Rihab Bellakhal & Marc-Arthur Diaye, 2016. "Financial Participation: Does the Risk Transfer Story Hold in France?," British Journal of Industrial Relations, London School of Economics, vol. 54(1), pages 3-29, March.
    12. KATO Takao & KODAMA Naomi, 2015. "Performance-related Pay and Productivity: Evidence from Japan," Discussion papers 15088, Research Institute of Economy, Trade and Industry (RIETI).
    13. Almudena Cañibano & David Marsden, 2009. "Participation in Organisations: Economic Approaches," CEP Discussion Papers dp0945, Centre for Economic Performance, LSE.
    14. Kornelius Kraft & Julia Lang, 2016. "Just a Question of Selection? The Causal Effect of Profit Sharing on a Firm's Performance," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(3), pages 444-467, July.
    15. James Arrowsmith & Paul Marginson, 2011. "Variable Pay and Collective Bargaining in British Retail Banking," British Journal of Industrial Relations, London School of Economics, vol. 49(1), pages 54-79, March.

    More about this item

    Keywords

    share ownership; payment systems; labour productivity;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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