Profit Sharing, Risk Sharing, and Firm Size: Implications of Efficiency Wages

Juin-jen Chang

Small Business Economics, 2006, vol. 27, issue 2, 273 pages

Abstract: By taking account of output fluctuations, this paper constructs a synthesis of profit-sharing and efficiency-wage models to highlight the role of the risk attitudes of the firm and its employees. We show, contrary to the traditional efficiency wage theory, that in a profit-sharing economy unemployment is no longer a necessary device to induce work effort and, consequently, the labor market equilibrium may be characterized by full employment. Such a result is more likely to be true when the economy is characterized by small-sized firms. In addition, we also provide a preliminary sketch of the situations in which the firm chooses a profit-sharing program or a fixed-wage one, and discuss how a firm determines its pay parameters and employment in response to output fluctuations. Copyright Springer 2006

Keywords: Profit sharing; Risk sharing; Efficiency wages; Firm size; J33; J41; D82; J21 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:sbusec:v:27:y:2006:i:2:p:261-273

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DOI: 10.1007/s11187-006-0022-y

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