Profit-Sharing and Productivity: An Analysis of UK Engineering Firms

John Cable and Nicholas Wilson

Economic Journal, 1989, vol. 99, issue 396, 366-75

Abstract: This paper reports productivity differentials of 3-8 percent in favor of profit-sharing firms in the U.K. engineering industry. The estimates come from equations in which profit sharing interacts with factor input levels and the firms' technological, organizational, and labor-force characteristics, and imply more than a simple incentive effect on work effort, or more "cooperative" behavior in given circumstances. A technological/labor-relations interpretation of the origin of the gains is suggested, which are found to be asymmetrically distributed. The results question policy measures to encourage profit sharing that do not take account of its significance in the process of organizational design. Copyright 1989 by Royal Economic Society.

Date: 1989
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