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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/65848
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| Title: | | Profit sharing and relative consumption  |
| Authors: | | Goerke, Laszlo |
| Issue Date: | | 2012 |
| Series/Report no.: | | CESifo Working Paper: Labour Markets 3970 |
| Abstract: | | Traditionally, it has been argued that profit sharing can increase employment and welfare because it lowers marginal labour costs without reducing total cost or 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. Mandatory profit sharing reduces wages. If the rise in profit income keeps total income constant, profit sharing will have no income but only a substitution effect. Since labour supply is excessive, profit sharing constitutes a Pareto-improvement. |
| Subjects: | | labour supply profit sharing relative consumption status concerns |
| JEL: | | D62 J22 J33 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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