Profit Sharing and Productivity: Microeconomic Evidence from the United States

• Published in: The Economic journal (London) Vol. 102; no. 410; pp. 24 - 36
• Main Author: Kruse, Douglas L.
• Format: Journal Article
• Language: English
• Published: Cambridge Blackwell Publishers 01.01.1992; Cambridge University Press; Oxford University Press
• Subjects: Business structures; Coefficients; Economic models; Economic statistics; Economic theory; Employee motivation; Employee stock option plans; Hypotheses; Manufacturing; Microeconomics; Natural logarithms; Pension plans; Productivity; Profit sharing; Profit sharing plans; Regression analysis; Regression coefficients; U.S.A; Variable coefficients; United States > US
• ISSN: 0013-0133; 1468-0297
• DOI: 10.2307/2234849

Although the concept of profit sharing has existed for over a century, the practice of profit sharing is not dominant in Western industrialized countries. The relationship of profit-sharing plans to productivity is examined. The data set used was constructed from CompuStat data on publicly traded companies and Form 5500 pension plan data from the US government. The coefficients on dummy variables for the adoption of profit sharing were positive in all specifications for both manufacturing and nonmanufacturing data. The results indicate that adoption of profit sharing is associated with a 2.8%-3.5% productivity increase for manufacturing companies and a 2.5%-4.2% increase for nonmanufacturing companies. When profit sharing is measured as a proportion of employees covered, the estimated effects increase to 7.9-8.9% for manufacturing and 10.3.%-11.0% for nonmanufacturing companies.