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Determinants of Profit Sharing in the Finnish Sector

  • Arrantz-Aperte, Laura


    (Swedish School of Economics and Business Administration)

  • Heshmati, Almas


    (The United Nations University, World Institute for Development Economics Research)

This study investigates the role of factors that determine individual employee’s and firms participation in profit sharing schemes. Using a large panel data of Finnish employees for the period 1996-2000 we analyse individual and workplace characteristics that make firms employ profit sharing schemes and workers susceptible of receiving profit sharing bonuses. In particular two links between profit sharing schemes and workers performance have been analysed. First, in looking at profit sharing as an incentive device the results show a positive link between firm size and monitoring costs. Second, we find that younger individuals with higher mean salary and capacity to bear risk are more susceptible to profit sharing schemes. The industrial sector in which the individual is employed is also an important determinant factor. We find weak evidence of a relationship between performance of firms and employment of profit sharing schemes at the industrial sector level.

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Paper provided by Hanken School of Economics in its series Working Papers with number 492.

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Length: 32 pages
Date of creation: 27 Nov 2003
Date of revision:
Handle: RePEc:hhb:hanken:0492
Contact details of provider: Postal: Hanken School of Economics, Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland
Phone: +358-9-431 331
Fax: +358-9-431 33 333
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  1. Cahuc, P. & Dormont, B., 1992. "Profit-Sharing: Does It Increase Productivity and Employment? A Theoretical Model and Empirical Evidence of French Micro Data," Papiers d'Economie Mathématique et Applications 92.45, Université Panthéon-Sorbonne (Paris 1).
  2. David Margolis & Kjell G, Salvanes, 2001. "Do Firms Really Share Rents with their Workers," Working Papers 2001-16, Centre de Recherche en Economie et Statistique.
  3. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  4. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  5. Charles Brown, 1989. "Firms' Choice of Method of Pay," NBER Working Papers 3065, National Bureau of Economic Research, Inc.
  6. Kölling, Arnd & Schnabel, Claus & Wagner, Joachim, 2002. "Establishment age and wages: evidence from German linked employer-employee data," Discussion Papers 13, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  7. Bauer, Thomas K., 2003. "Flexible Workplace Practices and Labor Productivity," IZA Discussion Papers 700, Institute for the Study of Labor (IZA).
  8. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  9. 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.
  10. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
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