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Profit sharing with heterogeneous entrepreneurial prowess

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  • Cardoso, Renato Fragelli

Abstract

This paper analyzes the impact of profit sharing on the incentives that individuals face to set up their own business. It presents a model of capital accumulation in which individuals are equally skilled to be workers but differ in their abilities to manage a firm Given an exogenous profit sharing parameter, an individual chooses whether to be an employer or an employee in order to maximize his net income. It is shown that profit sharing can inhibit entrepreneurial initiatives, reducing the number of firms in operation, the aggregate output and the economy's long run capital stock.

Suggested Citation

  • Cardoso, Renato Fragelli, 1995. "Profit sharing with heterogeneous entrepreneurial prowess," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 265, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:epgewp:265
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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. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-817, August.
    3. Cooper, Russell, 1988. "Will Share Contracts Increase Economic Welfare?," American Economic Review, American Economic Association, vol. 78(1), pages 138-154, March.
    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. Weitzman, Martin L, 1983. "Some Macroeconomic Implications of Alternative Compensation Systems," Economic Journal, Royal Economic Society, vol. 93(372), pages 763-783, December.
    6. Cable, John & Wilson, Nicholas, 1989. "Profit-Sharing and Productivity: An Analysis of UK Engineering Firms," Economic Journal, Royal Economic Society, vol. 99(396), pages 366-375, June.
    7. Blanchflower, David G & Oswald, Andrew J, 1987. "Profit Sharing--Can It Work?," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 1-19, March.
    8. Bell, Linda A & Neumark, David, 1993. "Lump-Sum Payments and Profit-Sharing Plans in the Union Sector of the United States Economy," Economic Journal, Royal Economic Society, vol. 103(418), pages 602-619, May.
    9. Brunello, Giorgio, 1992. "Profit Sharing in Internal Labour Markets," Economic Journal, Royal Economic Society, vol. 102(412), pages 570-577, May.
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    Cited by:

    1. repec:sbe:breart:v:16:y:1996:i:1:a:2880 is not listed on IDEAS
    2. Cysne, Rubens Penha & Costa, Sergio Gustavo Silveira da, 1997. "Effects of the real plan of the Brazilian banking system," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 304, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    3. Ferreira, Pedro Cavalcanti, 1997. "A note on growth, welfare and public policy," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 298, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    4. Ferreira, Pedro Cavalcanti, 1997. "Infrastructure privatization in a neoclassical economy : macroeconomic impact and welfare computation," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 297, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    5. Júnior, Antonio Marcos Duarte & Werlang, Sérgio Ribeiro da Costa, 1996. "A Model to Estimate the Us Term Structure of Interest Rates," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 16(1), November.
    6. Ferreira, Pedro Cavalcanti, 1996. "Sustained growth, government expenditure and inflation," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 278, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    7. Flôres Junior, Renato Galvão & Ginsburgh, Victor, 1996. "Dynamic hedonic regressions: computation and properties," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 275, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

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