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Profit Sharing and Relative Consumption

  • Goerke, Laszlo

Traditionally, it has been argued that profit sharing can increase employment and welfare because it lowers marginal labour costs without reducing labour income. In this paper, we show that profit sharing can also represent a Pareto-improvement if labour supply is excessive due to relative consumption effects. This is the case because mandatory profit sharing reduces wages and raises the workers' profit income, thereby mitigating excessive labour supply incentives.

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File URL: http://econstor.eu/bitstream/10419/66064/1/VfS_2012_pid_254.pdf
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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century with number 66064.

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Date of creation: 2012
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Handle: RePEc:zbw:vfsc12:66064
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Giacomo Corneo, 2000. "The Efficient Side of Progressive Income Taxation," CESifo Working Paper Series 364, CESifo Group Munich.
  2. Jackman, Richard, 1988. "Profit-sharing in a unionised economy with imperfect competition," International Journal of Industrial Organization, Elsevier, vol. 6(1), pages 47-57, March.
  3. Jerger, Jurgen & Michaelis, Jochen, 1999. " Profit Sharing, Capital Formation and the NAIRU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(2), pages 257-75, June.
  4. Persson, Mats, 1995. " Why Are Taxes So High in Egalitarian Societies?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 569-80, December.
  5. Weitzman, Martin L, 1985. "The Simple Macroeconomics of Profit Sharing," American Economic Review, American Economic Association, vol. 75(5), pages 937-53, December.
  6. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
  7. Francisco Alvarez-Cuadrado, 2007. "Envy, leisure, and restrictions on working hours," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1286-1310, November.
  8. Lin, Chung-cheng & Chang, Juin-jen & Lai, Ching-chong, 2002. "Profit sharing as a worker discipline device," Economic Modelling, Elsevier, vol. 19(5), pages 815-828, November.
  9. Eckalbar, John C., 1988. "Profit sharing in a competitive environment," Economic Modelling, Elsevier, vol. 5(4), pages 396-402, October.
  10. Georges, Christophre, 1998. "Profit-Shares, Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 286-91, April.
  11. Michaelis, Jochen, 1997. "On the equivalence of profit and revenue sharing," Economics Letters, Elsevier, vol. 57(1), pages 113-118, November.
  12. Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
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