Profit-Sharing, Employment Stability, and Wage Growth

Omar Azfar and Stephan Danninger

ILR Review, 2001, vol. 54, issue 3, 619-630

Abstract: The authors conjecture that profit-sharing reduces turnover and thus increases expected returns to firm-specific human capital investments, so that the optimal levels of skill acquisition and investment in firm-specific skills rise and ultimately increase productivity. Empirical evidence from NLSY data on white men in nonunion jobs between 1988 and 1994 supports this hypothesis. Employees participating in profit-sharing plans were less likely than non-participants to separate from their jobs. They also received training more frequently and for longer durations. Finally, the authors show that profit-sharing was related to higher wage growth, indicating a faster rate of skill accumulation.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:54:y:2001:i:3:p:619-630

DOI: 10.1177/001979390105400305

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