Abstract
The pay parameters in a profit-sharing system are likely to be determined by collective bargaining between unions and employers. In this case, employment will not necessarily be higher under profit sharing than under a fixed wage system. For a fixed capital stock, the most likely case is that profit sharing is better for unions and worse for employers than a fixed wage system. With endogenous investments, both parties may be worse off under profit sharing than under a fixed wage system. This might be one of the reasons why we in fact do not observe much profit sharing under collective bargaining.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have