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Profit Sharing, Capital Formation and the NAIRU

Jurgen Jerger and Jochen Michaelis

Scandinavian Journal of Economics, 1999, vol. 101, issue 2, 257-275

Abstract: This paper reconsiders the impact of different remuneration systems on aggregate employment. Contrary to common wisdom on this topic, we show that the switch from a fixed wage economy to a share economy results in lower aggregate unemployment. An additional innovation of this paper is the endogeneity of the capital stock decision of the firm, which enables us to assess and reject the common “disincentive‐to‐invest” criticism of a share economy.

Date: 1999
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