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- W2938644677 abstract "Purpose This purpose of this paper to examine how profit sharing depends on the underlying profitability of firms. More precisely, motivated by theoretical research on fair wages and unionized labor markets, profit sharing is estimated for six different profitability categories: positive, increasing, positive and increasing, negative, decreasing and negative or decreasing. Design/methodology/approach The paper exploits a high-quality linked employer–employee data set covering the universe of Finnish workers and firms. Endogeneity of profitability and self-selection of firms in different profitability categories are accounted for by an instrumental variables approach. The panel-structure of the data is used to control for unobserved heterogeneity (spell and individual fixed effects). Findings Profits are shared if firms are profitable or become more profitable. The wage-profit elasticity varies between 0.03 and 0.13 in such firms. However, profits are not shared if firms make losses or become less profitable. There is no downward wage adjustment. Research limitations/implications Because of the instrumental variables approach the question of external validity arises. Further empirical research on profit sharing with an explicit focus on firm profitability is warranted. The results of the paper indicate a connection between rent sharing and wage rigidity, as suggested by union and fair wage theory. Originality/value This is the first paper to consistently estimate the extent of profit sharing depending on the underlying profitability of firms." @default.
- W2938644677 created "2019-04-25" @default.
- W2938644677 creator A5032766872 @default.
- W2938644677 date "2018-11-06" @default.
- W2938644677 modified "2023-10-16" @default.
- W2938644677 title "Profit sharing and firm profitability" @default.
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- W2938644677 doi "https://doi.org/10.1108/jpeo-02-2018-0007" @default.
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