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Lump-Sums, Profit Sharing, and the Labor Costs in the Union Sector

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  • Linda A. Bell
  • David Neumark

Abstract

This paper documents the increase in the use of lump-sum payments and profit sharing plans in union contracts in the 1980s, and evaluates the extent to which these innovations may have contributed to moderation in the growth of labor costs, and increased pay flexibility. We find evidence that lump-sum and profit sharing arrangements reduced labor cost growth at both the aggregate and firm level. But the evidence linking these plans to labor cost flexibility is mixed; although the evidence suggests that profit sharing plans may be associated with greater flexibility at the firm level, there is no evidence that lump-sum plans increase flexibility at either the firm or aggregate level.

Suggested Citation

  • Linda A. Bell & David Neumark, 1991. "Lump-Sums, Profit Sharing, and the Labor Costs in the Union Sector," NBER Working Papers 3630, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3630
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    References listed on IDEAS

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    1. Freeman, Richard B. & Weitzman, Martin L., 1987. "Bonuses and employment in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 1(2), pages 168-194, June.
    2. Robert J. Gordon, 1988. "U.S. Inflation, Labor's Share, and the Natural Rate of Unemployment," NBER Working Papers 2585, National Bureau of Economic Research, Inc.
    3. Weitzman, Martin L, 1985. "The Simple Macroeconomics of Profit Sharing," American Economic Review, American Economic Association, vol. 75(5), pages 937-953, December.
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    Cited by:

    1. Neumark, David & Leonard, Jonathan S, 1993. "Inflation Expectations and the Structural Shift in Aggregate Labor-Cost Determination in the 1980s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 786-800, November.
    2. David Neumark, 1992. "Are Rising Wage Profiles a Forced-Saving Mechanism?," NBER Working Papers 4213, National Bureau of Economic Research, Inc.

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