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Profit-Shares, Bargaining, and Unemployment

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  • Georges, Christophre

Abstract

This paper considers the effect of profit sharing on unemployment in a simple model with an employment externality, overhead costs, and free entry. When wages are determined by Nash bargains and employment is set by firms, equilibrium unemployment is unambiguously reduced by mandated profit sharing. However, a bargained profit share may have the perverse effect of lowering both employment and compensation in general equilibrium. If overhead costs relevant to firms' entry decisions are excluded from the profit share accounting, then a mandated profit share may also have such a perverse effect. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Georges, Christophre, 1998. "Profit-Shares, Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 286-291, April.
    • Handle: RePEc:oup:ecinqu:v:36:y:1998:i:2:p:286-91
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    Cited by:

    1. Bratsiotis, George J., 2008. "Influential price and wage setters, monetary policy and real effects," European Journal of Political Economy, Elsevier, vol. 24(2), pages 503-517, June.
    2. Goerke, Laszlo, 2013. "Profit sharing and relative consumption," Economics Letters, Elsevier, vol. 118(1), pages 167-169.
    3. Chia-ying Liu & Juin-jen Chang, 2011. "Macroeconomic implications of a sharing compensation scheme in a model of endogenous growth," Journal of Economics, Springer, vol. 102(1), pages 57-75, January.

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