Employee Profit Sharing and Labor Extraction in a Classical Model of Distribution and Growth

Jaylson Silveira () and Gilberto Lima

No 2017_02, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper sets forth a classical model of economic growth in which the distribution of income features the possibility of profit sharing with workers, as firms choose periodically between two labor-extraction compensation strategies. Firms choose to compensate workers with either solely a conventional wage or a share of profits on top of this conventional wage. In accordance with considerable empirical evidence, labor productivity in profit-sharing firms is higher than labor productivity in non-sharing firms. The frequency distribution of labor-extraction compensation strategies and labor productivity across firms is evolutionarily time-varying as driven by satisficing imitation dynamics. We derive two main results which carry relevant implications. First, heterogeneity in labor-extraction compensation strategies across firms can be a stable long-run equilibrium configuration. Second, though the convergence to a long-run, evolutionary equilibrium may occur with either a falling or increasing proportion of profit-sharing firms, the net share of profits in aggregate income and the rates of net profit, capital accumulation and economic growth, all nonetheless converge to their highest possible long-run equilibrium values

Keywords: Profit sharing; income distribution; economic growth; evolutionary dynamics (search for similar items in EconPapers)
JEL-codes: E11 E25 J33 O41 (search for similar items in EconPapers)
Date: 2017-01-25
New Economics Papers: this item is included in nep-gro, nep-lma and nep-mac
Note: https://www.tandfonline.com/doi/full/10.1080/09538259.2018.1429149
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: EMPLOYEE PROFIT SHARING AND LABOR EXTRACTION IN A CLASSICAL MODEL OF DISTRIBUTION AND GROWTH (2018)
Journal Article: Employee Profit-sharing and Labor Extraction in a Classical Model of Distribution and Growth (2017)
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