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Equilibrium unemployment under negotiated profit sharing

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  • Koskela, Erkki
  • Stenbacka, Rune

Abstract

We study employment, employee effort, wages and profit sharing when firms face stochastic revenue shocks and when base wages and profit shares are determined through collective bargaining.The negotiated profit share depends positively on the relative bargaining power of the trade union and has effort-enhancing and wage-moderating effects.We show that higher profit sharing reduces equilibrium unemployment under circumstances with sufficiently rigid labour market institutions, ie sufficiently high benefit- replacement ratios and relative bargaining powers of trade unions.Conversely, profit sharing seems to be destructive from the point of view of employment when the labour market rigidities are sufficiently small.

Suggested Citation

  • Koskela, Erkki & Stenbacka, Rune, 2003. "Equilibrium unemployment under negotiated profit sharing," Bank of Finland Research Discussion Papers 19/2003, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2003_019
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    References listed on IDEAS

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    Cited by:

    1. Llewellyn, David T. & Mayes, David G., 2003. "The role of market discipline in handling problem banks," Bank of Finland Research Discussion Papers 21/2003, Bank of Finland.
    2. Anne Stévenot-Guéry & Loris Guéry, 2006. "Épargne salariale et stratégies syndicales:une analyse des représentations des syndicats à partir des discours," Working Papers CREGO 1060904, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
    3. Giorgia Piacentino & Anjan Thakor & Jason Donaldson, 2015. "Bank Capital, Bank Credit and Unemployment," 2015 Meeting Papers 1403, Society for Economic Dynamics.
    4. Anne Stevenot-Guery & Loris Guery, 2008. "Épargne salariale et stratégies syndicales : Une analyse des représentations des syndicats à partir des discours," Cahiers du CEREFIGE 0808, CEREFIGE (Centre Europeen de Recherche en Economie Financiere et Gestion des Entreprises), Universite de Lorraine, revised 2008.
    5. Tyrowicz, Joanna, 2009. "When Eastern Labour Markets Enter Western Europe CEECs. Labour Market Institutions upon Euro Zone Accession," MPRA Paper 15045, University Library of Munich, Germany.

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    More about this item

    Keywords

    wage bargaining; profit sharing; efficiency wages; equilibrium unemployment;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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