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The fixed wage puzzle: Why profit sharing is so hard to implement

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  • Jerger, Jürgen
  • Michaelis, Jochen

Abstract

Profit sharing arrangements Pareto-dominate fixed wage contracts, but are (far) less than ubiquitous. We account for this fixed wage puzzle by adopting a perspective of bounded rationality. Specifically, plausible share arrangements are not generally acceptable to both firms and unions.

Suggested Citation

  • Jerger, Jürgen & Michaelis, Jochen, 2011. "The fixed wage puzzle: Why profit sharing is so hard to implement," Economics Letters, Elsevier, vol. 110(2), pages 104-106, February.
    • Handle: RePEc:eee:ecolet:v:110:y:2011:i:2:p:104-106
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    References listed on IDEAS

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    1. Jurgen Jerger & Jochen Michaelis, 1999. "Profit Sharing, Capital Formation and the NAIRU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(2), pages 257-275, June.
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    14. Kirstein, Roland & Kirstein, Annette, 2004. "Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies," CSLE Discussion Paper Series 2004-09, Saarland University, CSLE - Center for the Study of Law and Economics.
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    Cited by:

    1. Gilberto Tadeu Lima & Jaylson Jair Silveira, 2021. "Evolutionary microdynamics of employee profit sharing as productivity-enhancing device," Journal of Evolutionary Economics, Springer, vol. 31(2), pages 417-449, April.
    2. Gilberto Tadeu Lima & Jaylson Jair da Silveira, 2018. "Macrodynamic Implications of Employee Profit Sharing as Effort Elicitation Device," Working Papers, Department of Economics 2018_02, University of São Paulo (FEA-USP).

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    More about this item

    Keywords

    Profit sharing Share economy Remuneration systems;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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