Legal Profit-Sharing: Shifting the Tax Burden in a Dual Economy

François Contensou ()
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François Contensou: ESSEC Business School, Postal: Avenue Bernard Hirsch - B.P. 50105, 95021 CERGY-PONTOISE CEDEX , FRANCE,, http://www.essec.com

No DR 04011, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: What are the consequences of laws imposing profit-sharing rates in the compensation of all forms of labor, when only a limited share of the productive sector is really making profit ? This problem is examined in the case of competitive labor markets, when firms of the profitable sector are facing a predetermined participation constraint. The proposed model details how legal profit-sharing contracts offer a form of evasion from wage-based social contributions in permitting substitution of wages with contingent claims on profits. Labor contracts are examined in a context in which effort is monitored or in which free-riding effects thwart the incentive effects of profit-sharing.

Keywords: Profit-sharing; Incentives; Labor contract (search for similar items in EconPapers)
JEL-codes: H30 K31 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-08
New Economics Papers: this item is included in nep-law and nep-pbe
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