Productivity, Earnings, and Profit Sharing--An Econometric Analysis of Alternative Models

Olaf Hübler

Empirical Economics, 1993, vol. 18, issue 2, 357-80

Abstract: The theoretical status of the relationship between productivity, wages, and profit sharing (PS) is poor. Only some alternative hypotheses can be formulated. From these explanations six different econometric models are derived. Using data of the German Socio-Economic Panel the models are estimated and tests and indicators are employed to choose the best model. Our investigation speaks in favor of hybrid simultaneous Tobit models where the level of profit sharing is positively correlated with productivity which induces positive wage effects on the one hand. But on the other hand the level of wages is also relevant to the question of whether a firm introduces or decides to continue PS and which amount PS should be paid.

Date: 1993
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