Journal article

The Fixed Wage Puzzle: Why Profit Sharing Is so Hard to Implement



Publication Details
Authors:
Michaelis, J.; Michaelis, J.; Jerger, J.

Publication year:
2011
Journal:
Economics Letters
Pages range :
104-106
Volume number:
110
ISSN:
0165-1765
DOI-Link der Erstveröffentlichung:


Abstract
It is well established in the literature that profit sharing arrangements Pareto-dominate fixed wage contracts. Despite this, share agreements are (far) less than ubiquitous. The present paper sheds new light on this ,,fixed wage puzzle" by adopting a perspective of bounded rationality. If firms and unions cannot fully think through all alternatives, they might impose some restrictions on the changeover to share contracts. In particular, profit sharing must not be a profit and/or wage decline. We show that these "plausible" constraints may well explain the reluctant use of share contracts.


Keywords
Profit sharing, Remuneration systems, Share economy


Authors/Editors


Research Areas


Last updated on 2022-20-04 at 14:23