Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/211870
Authors: 
Koskela, Erkki
Stenbacka, Rune
Year of Publication: 
2000
Series/Report no.: 
Bank of Finland Discussion Papers No. 16/2000
Abstract: 
We offer a unified framework to analyze the determination of employment, employee effort, wages, profit sharing and capital structure when firms face stochastic revenue shocks.We apply a generalized Nash bargaining solution, which extends the wage bargaining literature by incorporating efficiency wage considerations, profit sharing and capital structure.The profit sharing instrument is demonstrated to have positive effort-augmenting and wage-moderating effects, which exactly offset the negative dilution effect in equilibrium.Leverage is shown to reduce employment and to have a strategic commitment value as a wage-moderating mechanism for firms facing unions in bilateral wage negotiations.Finally, some implications for equilibrium unemployment are discussed.
Subjects: 
wage bargaining
profit sharing
capital structure
employment
Persistent Identifier of the first edition: 
ISBN: 
951-686-681-6
Document Type: 
Working Paper

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