Profit Sharing and the Financial Performance of Firms

Abstract

Our previous findings take us straight to the next question. The empirical results in chapter 5 pointed to significantly higher output and employment growth due to the introduction of profit sharing. Productivity growth, however, was only insignificantly affected. Kraft and Ugarkovic’s (2005) theoretical model provided an explanation: Profit sharing leads to an increase in productivity which induces firms to extend output and employment. With a declining marginal product of labour, however, the estimated productivity level might not differ very much from the one before the introduction of the sharing system.31