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Title:Equilibrium Unemployment Under Negotiated Profit Sharing PDF Logo
Authors:Koskela, Erkki
Stenbacka, Rune
Issue Date:2003
Series/Report no.:IZA Discussion paper series 840
Abstract:We study employment, employee effort, wages and profit sharing when firms face stochastic revenue shocks and when base wages and profit shares are determined through negotiations. The negotiated profit share depends positively on the relative bargaining power of the trade union and it has effort-enhancing and wage-moderating effects. We show that higher profit sharing reduces equilibrium unemployment under circumstances with sufficiently ?rigid? labour market institutions, i.e. sufficiently high benefit-replacement ratios and relative bargaining powers of trade unions. Conversely, profit sharing seems to be destructive from the point of view of employment when the labour market ?rigidities? are sufficiently small.
Subjects:bargaining
profit sharing
efficiency wages
equilibrium unemployment
JEL:J41
G32
J51
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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