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Mandatory profit sharing, entrepreneurial incentives and capital accumulation

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  • Cardoso, Renato Fragelli

Abstract

The impact of a mandatory tax on profits which is transferred to workers is analyzed in a general equilibrium entrepreneurial model. In the short run, this distortion reduces the number of firms and the aggregate output. In the long run, if capital and labor are bad substitutes, it fosters capital accumulation and increases the aggregate output. In a small open economy with free movement of capital, it improves the welfare of the economy's average individual. One concludes that the benefits of sharing schemes may go beyond the short run employment-stabilization goal focused by the profit sharing literature.

Suggested Citation

  • Cardoso, Renato Fragelli, 1997. "Mandatory profit sharing, entrepreneurial incentives and capital accumulation," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 318, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:318
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    References listed on IDEAS

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    1. Felix R. FitzRoy & Kornelius Kraft, 1987. "Cooperation, Productivity, and Profit Sharing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(1), pages 23-35.
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    Cited by:

    1. Gonçalves, Antonio Carlos Porto, 1998. "Currency accounting in Central Bank balance sheet," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 326, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

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