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Profit Sharing and Employment Stability

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  • James Chelius
  • Robert S. Smith

Abstract

This paper tests the hypothesis that workers whose compensation packages contain a profit-sharing component are less susceptible to layoff in the face of negative shocks to product demand than are workers paid a fixed, time-based wage. The theory is tested on two data sets, one a household survey and the other a survey of small businesses conducted by the authors. The characteristics of profit sharing among small businesses by and large meet the theoretical requirements for stabilizing employment, and the authors do find evidence in both samples to support the hypothesis; the evidence, however, is of borderline statistical significance and is therefore more suggestive than definitive.

Suggested Citation

  • James Chelius & Robert S. Smith, 1990. "Profit Sharing and Employment Stability," ILR Review, Cornell University, ILR School, vol. 43(3), pages 256-2-273-, April.
    • Handle: RePEc:sae:ilrrev:v:43:y:1990:i:3:p:256-s-273-s
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    Cited by:

    1. Derek C. Jones & Takao Kato & Jeffrey Pliskin, 1994. "Profit Sharing and Gainsharing: A Review of Theory, Incidence, and Effects," Economics Working Paper Archive wp_125, Levy Economics Institute.
    2. repec:zbw:bofrdp:2017_033 is not listed on IDEAS
    3. Jones, Derek C. & Kalmi, Panu & Kato, Takao & Mäkinen, Mikko, 2017. "Worker separation under performance pay : Empirical evidence from Finland," Research Discussion Papers 33/2017, Bank of Finland.
    4. Drago, Robert & Turnbull, Geoffrey K., 1996. "On the incidence of profit sharing," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 129-138, October.
    5. Douglas L. Kruse, 1993. "Does Profit Sharing Affect Productivity?," NBER Working Papers 4542, National Bureau of Economic Research, Inc.
    6. Gary W. Florkowski, 1994. "Employment Growth and Stability under Profit-Sharing: A Longitudinal Study," British Journal of Industrial Relations, London School of Economics, vol. 32(3), pages 303-318, September.

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