Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/211952
Authors: 
Koskela, Erkki
Stenbacka, Rune
Year of Publication: 
2003
Series/Report no.: 
Bank of Finland Discussion Papers No. 19/2003
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 collective bargaining.The negotiated profit share depends positively on the relative bargaining power of the trade union and has effort-enhancing and wage-moderating effects.We show that higher profit sharing reduces equilibrium unemployment under circumstances with sufficiently rigid labour market institutions, ie 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: 
wage bargaining
profit sharing
efficiency wages
equilibrium unemployment
JEL: 
J51
J41
G32
Persistent Identifier of the first edition: 
ISBN: 
952-462-074-X
Document Type: 
Working Paper

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