Profit-Sharing as Tax Saving and Incentive Device

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

No DR 04012, ESSEC Working Papers from ESSEC Research Center, ESSEC Business School

Abstract: The theory of labor contract with worker’s chosen effort level mainly rests upon the principal-agent paradigm. In many labor markets however, the principal is not as free as assumed in the standard theory, but is submitted to some binding institutional constraints. It is requested in particular to post a wage level, i.e. a non random component of compensation to which high rates of social contribution may apply. The proposed model adapts the standard analysis to situations in which tax rules and possibly predetermined profit-sharing patterns interfere with free contracting. It formalizes the two-faced aspect of profit sharing having an impact on the firm’s objective through tax saving effect and incentive effect.

Keywords: Profit-sharing; Incentives; Tax evasion (search for similar items in EconPapers)
JEL-codes: J31 J33 K34 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2004-10
New Economics Papers: this item is included in nep-bec and nep-law
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