Macrodynamic Implications of Employee Profit Sharing as Effort Elicitation Device

Gilberto Lima and Jaylson Silveira (jaylson.silveira@ufsc.br)

No 2018_02, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: We devise a growth model where the distribution of factor income is affected by the possibility of profit sharing with workers. Firms choose periodically to compensate workers with only a real base wage or a share of profits in addition to this real base wage as alternative effort-elicitation strategies. As validated by empirical evidence, labor productivity is higher in profit-sharing firms than in non-sharing firms. The frequency distribution of effort-elicitation strategies and labor productivity across firms are co-evolutionarily time-varying, which then affects the dynamics of the distribution of income between profits and wages and therefore the savings-determined growth rate. Heterogeneity in effort-elicitation strategies across firms (and hence earnings inequality across workers) can be a stable long-run equilibrium. In such a polymorphic equilibrium, the frequency of profit-sharing firms varies positively (negatively) with the real base wage (profit-sharing coefficient). As shown analytically and with numerical simulations, the micro- and macrodynamics of the economy are crucially affected by the profit-sharing coefficient and the real base wage as bifurcation parameters.

Keywords: Profit sharing; evolutionary dynamics; economic growth; income distribution. (search for similar items in EconPapers)
JEL-codes: E11 E25 J33 O41 (search for similar items in EconPapers)
Date: 2018-03-05
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.repec.eae.fea.usp.br/documentos/Lima_Silveira_02WP.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spa:wpaper:2018wpecon02

Ordering information: This working paper can be ordered from
cpgipe@usp.br

Access Statistics for this paper

More papers in Working Papers, Department of Economics from University of São Paulo (FEA-USP) Contact information at EDIRC.
Bibliographic data for series maintained by Pedro Garcia Duarte (pgduarte@usp.br this e-mail address is bad, please contact repec@repec.org).