Profit Sharing May Increase Unemployment

Hans Jørgen Jacobsen and Christian Schultz ()
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Hans Jørgen Jacobsen: Institute of Economics, University of Copenhagen

No 89-02, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper investigates the effects on production and employment of an introduction of profit sharing in an economy initially stuck in unemployment. The economy considered is divided into many small production sectors. in each sector the wage rate is negotiated between an employers' union and a trade union of that sector. In the wage negotiation unions take the profit share to workers as given. Results are that there is a broad class of production sectors, characterized in the paper, in which the introduction profit sharing increases unemployment. By means of a simple example it is also shown that a simultaneous introduction of profit sharing in all sectors of the economy can have negative effects on production and employment.

Pages: 13 pages
Date: 1989-01
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:8902

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