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

  • Daniel Parent

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.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2002s-54.

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Length: 13 pages
Date of creation: 01 May 2002
Date of revision:
Handle: RePEc:cir:cirwor:2002s-54
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  1. Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps, December.
  2. Robert Gibbons & Lawrence F. Katz & Thomas Lemieux & Daniel Parent, 2002. "Comparative Advantage, Learning, and Sectoral Wage Determination," CIRANO Working Papers 2002s-35, CIRANO.
  3. 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.
  4. Katharine G. Abraham & Henry S. Farber, 1986. "Job Duration, Seniority, and Earnings," NBER Working Papers 1819, National Bureau of Economic Research, Inc.
  5. Joseph Altonji & R. Shakotko, 1985. "Do Wages Rise with Job Seniority?," Working Papers 567, Princeton University, Department of Economics, Industrial Relations Section..
  6. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-79, July.
  7. Omar Azfar & Stephan Danninger, 2001. "Profit sharing, employment stability, and wage growth," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(3), pages 619-630, April.
  8. FitzRoy, Felix R & Kraft, Korenelius, 1987. "Cooperation, Productivity, and Profit Sharing," The Quarterly Journal of Economics, MIT Press, vol. 102(1), pages 23-35, February.
  9. 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.
  10. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-80, June.
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