Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/63740
Authors: 
Koskela, Erkki
Stenbacka, Rune
Year of Publication: 
2003
Series/Report no.: 
ETLA Discussion Papers, The Research Institute of the Finnish Economy (ETLA) 863
Abstract: 
We offer a unified framework to analyze the determination of employment, employee effort, wages and profit sharing 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 exogenous capital structure. The profit sharing instrument is demonstrated to have positive effort-enhancing and wage-moderating effects, which exactly offset the negative dilution effect in equilibrium. We show that introduction of profit sharing decreases equilibrium unemployment if the benefit replacement ratio is high enough, whereas the reverse holds if the benefit replacement ratio is below this threshold.
JEL: 
J51
J41
G32
Document Type: 
Working Paper

Files in This Item:
File
Size
362.22 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.