Abstract
This paper analyzes the price level and output stabilization properties of share contracts in a log-linear rational expectations model. Profit sharing, product wage and wage fund share contracts are compared to flexible and downwardly rigid nominal wage schemes. We find that when the disturbances to the economy are nominal labor compensation schemes which reduce real variability exacerbate nominal variability. When the disturbances are real, compensation schemes which reduce real variability can also reduce nominal variability.
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