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Incentives? The Effect of Profit Sharing Plans Offered by Previous Employers on Current Wages

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  • Daniel Parent

Abstract

In this paper, I investigate the relationship between wages and the use of profit sharing plans by both current and past employers. Using data from the National Longitudinal Survey of Youth, I find that when I control for the number of years on profit sharing plans prior to the current job, the wage effect of those previous plans is both economically and statistically significant while the wage effect of current plans is markedly reduced, if not completely eliminated. This result sheds doubt on a simple incentive-for-effort explanation for the wage/productivity impact previously measured and suggests that an alternative mechanism based on skill acquisition is likely to play a role. Dans cette étude, j'examine le lien entre la rémunération versée aux travailleurs et l'utilisation de programmes de partage de profits («profit sharing») par l'employeur actuel ainsi que les employeurs précédents. Avec des données du National Longitudinal Survey of Youth, je trouve que l'effet des programmes de partage de profits dont ont bénéficié les travailleurs dans leurs emplois antérieurs à leur emploi actuel est économiquement et statistiquement significatif. De fait, tenir compte de ces programmes dans une équation de gains standard réduit de façon très substantielle ou même totalement l'effet de programmes similaires offerts par l'employeur actuel. Ce dernier résultat laisse planer un doute sérieux sur une explication standard (quoique problématique) donnée pour justifier l'existence de l'effet positif des programmes de partage de profits, à savoir un effet incitatif à l'effort. Les résultats sont davantage cohérents avec le fait que les travailleurs bénéficiant de tels programmes acquièrent des habiletés transférables d'un employeur à un autre.

Suggested Citation

  • Daniel Parent, 2002. "Incentives? The Effect of Profit Sharing Plans Offered by Previous Employers on Current Wages," CIRANO Working Papers 2002s-54, CIRANO.
  • Handle: RePEc:cir:cirwor:2002s-54
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    References listed on IDEAS

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    1. Felix R. FitzRoy & Kornelius Kraft, 1987. "Cooperation, Productivity, and Profit Sharing," The Quarterly Journal of Economics, Oxford University Press, vol. 102(1), pages 23-35.
    2. Jones, Derek C & Kato, Takao, 1995. "The Productivity Effects of Employee Stock-Ownership Plans and Bonuses: Evidence from Japanese Panel Data," American Economic Review, American Economic Association, vol. 85(3), pages 391-414, June.
    3. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-580, June.
    4. Kruse, Douglas L, 1992. "Profit Sharing and Productivity: Microeconomic Evidence from the United States," Economic Journal, Royal Economic Society, vol. 102(410), pages 24-36, January.
    5. Robert Gibbons & Lawrence F. Katz & Thomas Lemieux & Daniel Parent, 2005. "Comparative Advantage, Learning, and Sectoral Wage Determination," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 681-724, October.
    6. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-979, July.
    7. Joseph G. Altonji & Robert A. Shakotko, 1987. "Do Wages Rise with Job Seniority?," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 437-459.
    8. 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.
    9. Abraham, Katharine G & Farber, Henry S, 1987. "Job Duration, Seniority, and Earnings," American Economic Review, American Economic Association, vol. 77(3), pages 278-297, June.
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    Cited by:

    1. Kornelius Kraft & Julia Lang, 2013. "Profit Sharing and Training," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 940-961, December.
    2. Damiani, Mirella & Ricci, Andrea, 2016. "Training, quality of management and firm level bargaining," MPRA Paper 72209, University Library of Munich, Germany.
    3. Gielen, A. C., 2007. "Performance Pay, Training and Labor Mobility," Discussion Paper 2007-48, Tilburg University, Center for Economic Research.
    4. Petr Petera & Jana Fibírová, 2015. "Basic Approaches to Profit-Sharing and Ideas for Utilization," Český finanční a účetní časopis, University of Economics, Prague, vol. 2015(3), pages 97-117.
    5. Damiani, Mirella & Ricci, Andrea, 2016. "Training, quality of management and firm level bargaining," MPRA Paper 72138, University Library of Munich, Germany.
    6. Naci Mocan & Erdal Tekin, 2011. "Obesity, Self-Esteem and Wages," NBER Chapters,in: Economic Aspects of Obesity, pages 349-380 National Bureau of Economic Research, Inc.
    7. C Green & J S Heywood, 2007. "Does profit sharing increase training by reducing turnover?," Working Papers 589032, Lancaster University Management School, Economics Department.
    8. Curme, Michael & Stefanec, Noah, 2007. "Worker quality and labor market sorting," Economics Letters, Elsevier, vol. 96(2), pages 202-208, August.

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