Goods-market competition and profit sharing: a multisector macro approach

John Duca and David VanHoose

No 9709, Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper develops a theoretical model that relates the degree of goods-market competition with the extent of profit sharing. The authors multisector framework indicates that increased competition in goods markets leads to an increased weighting on firm profits in an optimally indexed contract. Consequently, our model predicts that a rising extent of profit-sharing arrangements in actual U.S. contracts should accompany an increase in the degree of goods-market competition. Available, but limited, data on profit sharing in the United States is generally consistent with this fundamental implication of the model.

Pages: 15 pages
Date: 1997
Note: Published as: Duca, John V. and David D. VanHoose (1998), "Goods-Market Competition and Profit Sharing: A Multisector Macro Approach," Journal of Economics and Business 50 (6): 525-534.
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Journal Article: Goods-market competition and profit sharing: a multisector macro approach (1998)
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