Macroeconomic Performance under an Evolutionary Dynamics of Profit Sharing

Gilberto Lima and Jaylson Jair Silveira ()

No 2014_27, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper explores implications for capacity utilization and economic growth driven by effective demand of income distribution featuring the possibility of profit sharing with workers. Firms choose to compensate workers with either a base wage or a share of profits on top of this base wage. In accordance with robust empirical evidence, workers in sharing firms have higher productivity than workers in non-sharing firms. Meanwhile, the joint frequency distribution of employee compensation strategies and labor productivity across firms is evolutionarily time-varying. Two major results carrying relevant theoretical and policy implications obtain from our exploration. First, heterogeneity in employee compensation strategies across firms may emerge as a permanent, long-run equilibrium outcome. Second, in the long run, a higher frequency of profit-sharing firms does not necessarily generate higher rates of capacity utilization and economic growth.

Keywords: Profit sharing; evolutionary dynamics; income distribution; capacity utilization; economic growth. (search for similar items in EconPapers)
JEL-codes: E12 E25 J33 O40 (search for similar items in EconPapers)
Date: 2014-11-07
New Economics Papers: this item is included in nep-evo, nep-gro, nep-lab, nep-lma and nep-mac
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