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Legal Profit-Sharing: Shifting the Tax Burden in a Dual Economy

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What are the consequences of laws imposing profit-sharing rates in the compensation of all forms of labor, when only a limited share of the productive sector is really making profit ? This problem is examined in the case of competitive labor markets, when firms of the profitable sector are facing a predetermined participation constraint. The proposed model details how legal profit-sharing contracts offer a form of evasion from wage-based social contributions in permitting substitution of wages with contingent claims on profits. Labor contracts are examined in a context in which effort is monitored or in which free-riding effects thwart the incentive effects of profit-sharing.

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  • Contensou, François, 2004. "Legal Profit-Sharing: Shifting the Tax Burden in a Dual Economy," ESSEC Working Papers DR 04011, ESSEC Research Center, ESSEC Business School.
    • Handle: RePEc:ebg:essewp:dr-04011
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    More about this item

    Keywords

    Profit-sharing; Incentives; Labor contract;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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