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Determinants of Profit Sharing in the Finnish Corporate Sector

  • Arranz-Aperte, Laura

    ()

    (Swedish School of Economics)

  • Heshmati, Almas

    ()

    (Jönköping University, Sogang University)

This study investigates the role of factors that determine individual employees’ 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 776.

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Length: 28 pages
Date of creation: Apr 2003
Date of revision:
Publication status: published in: Indian Economic Review, 2004, 39 (1), 55-79
Handle: RePEc:iza:izadps:dp776
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  1. 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.
  2. Cahuc, Pierre & Dormont, Brigitte, 1997. "Profit-sharing: Does it increase productivity and employment? A theoretical model and empirical evidence on French micro data," Labour Economics, Elsevier, vol. 4(3), pages 293-319, September.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  4. Charles Brown, 1989. "Firms' Choice of Method of Pay," NBER Working Papers 3065, National Bureau of Economic Research, Inc.
  5. 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.
  6. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
  7. Bauer, Thomas K., 2003. "Flexible Workplace Practices and Labor Productivity," IZA Discussion Papers 700, Institute for the Study of Labor (IZA).
  8. 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.
  9. 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.
  10. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  11. repec:fth:inseep:2001-16 is not listed on IDEAS
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