Profit Sharing and Relative Consumption
Traditionally, it has been argued that profit sharing can increase employment and welfare because it lowers marginal labour costs without reducing total cost or labour income. In this paper, we show that profit sharing can also represent a Pareto-improvement if labour supply is excessive due to relative consumption effects. Mandatory profit sharing reduces wages. If the rise in profit income keeps total income constant, profit sharing will have no income but only a substitution effect. Since labour supply is excessive, profit sharing constitutes a Pareto-improvement.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lin, Chung-cheng & Chang, Juin-jen & Lai, Ching-chong, 2002. "Profit sharing as a worker discipline device," Economic Modelling, Elsevier, vol. 19(5), pages 815-828, November.
- Giacomo Corneo, 2000.
"The Efficient Side of Progressive Income Taxation,"
CESifo Working Paper Series
364, CESifo Group Munich.
- Georges, Christophre, 1998. "Profit-Shares, Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 286-91, April.
- Michaelis, Jochen, 1997. "On the equivalence of profit and revenue sharing," Economics Letters, Elsevier, vol. 57(1), pages 113-118, November.
- Martin L. Weitzman, 1984.
"The Simple Macroeconomics of Profit Sharing,"
357, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
- Jackman, Richard, 1988. "Profit-sharing in a unionised economy with imperfect competition," International Journal of Industrial Organization, Elsevier, vol. 6(1), pages 47-57, March.
- Persson, Mats, 1995. " Why Are Taxes So High in Egalitarian Societies?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 569-80, December.
- Eckalbar, John C., 1988. "Profit sharing in a competitive environment," Economic Modelling, Elsevier, vol. 5(4), pages 396-402, October.
- Francisco Alvarez-Cuadrado, 2007.
"Envy, leisure, and restrictions on working hours,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 40(4), pages 1286-1310, November.
- Clark, Andrew E. & Frijters, Paul & Shields, Michael A., 2007.
"Relative Income, Happiness and Utility: An Explanation for the Easterlin Paradox and Other Puzzles,"
IZA Discussion Papers
2840, Institute for the Study of Labor (IZA).
- Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
- Jerger, Jurgen & Michaelis, Jochen, 1999. " Profit Sharing, Capital Formation and the NAIRU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(2), pages 257-75, June.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3970. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)
If references are entirely missing, you can add them using this form.