Capital structure, wage bargaining and employment

Erkki Koskela and Rune Stenbacka

No 16/2000, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: We offer a unified framework to analyze the determination of employment, employee effort, wages, profit sharing and capital structure when firms face stochastic revenue shocks.We apply a generalized Nash bargaining solution, which extends the wage bargaining literature by incorporating efficiency wage considerations, profit sharing and capital structure.The profit sharing instrument is demonstrated to have positive effort-augmenting and wage-moderating effects, which exactly offset the negative dilution effect in equilibrium.Leverage is shown to reduce employment and to have a strategic commitment value as a wage-moderating mechanism for firms facing unions in bilateral wage negotiations.Finally, some implications for equilibrium unemployment are discussed.

Keywords: wage bargaining; profit sharing; capital structure; employment (search for similar items in EconPapers)
Date: 2000
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/211870/1/bof-rdp2000-016.pdf (application/pdf)

Related works:
Working Paper: Capital Structure, Wage Bargaining and Employment (2000)
Working Paper: Capital Structure, Wage Bargaining and Employment (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2000_016

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().