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Employee Stock Ownership vs. Profit Sharing

Author

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  • Rick Harbaugh

    (Claremont McKenna College)

Abstract

The idea that profit sharing increases employment has been widely tested, but the theoretical basis for the claim is weak and the empirical results are ambiguous. This paper shows that employee stock ownership based on individually-held stakes avoids the problems of traditional profit sharing. Employee stock ownership shifts employment to the efficient level by either raising employment from an initial state of underemployment or decreasing it from an initial state of overemployment. Since the effect on employment is not unidirectional, empirical tests need to differentiate between traditional profit sharing and employee stock ownership and to condition on the initial state of employment.

Suggested Citation

  • Rick Harbaugh, "undated". "Employee Stock Ownership vs. Profit Sharing," Claremont Colleges Working Papers 2000-28, Claremont Colleges.
  • Handle: RePEc:clm:clmeco:2000-28
    as

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    File URL: http://www.claremontmckenna.edu/rdschool/papers/2000-28.pdf
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    References listed on IDEAS

    as
    1. Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-337, April.
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    9. Wadhwani, Sushil & Wall, Martin, 1990. "The Effects of Profit-Sharing on Employment, Wages, Stock Returns and Productivity: Evidence from UK Micro-data," Economic Journal, Royal Economic Society, vol. 100(399), pages 1-17, March.
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    More about this item

    Keywords

    profit sharing; employee ownership; ESOPs; collective bargaining;

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises

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