Profit Sharing and Training*

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 6118 November 2011 ABSTRACT Profit Sharing and Training *We analyze the impact of profit sharing on the share of workers receiving training. An effect is plausible because: 1) profit sharing is a credible commitment by firms to reward firmspecific skills acquired by formal or informal training, 2) profit sharing may reduce turnover and increase the returns to training, 3) a common payment for the whole workforce leads to peer group pressure to participate in training courses and raises incentives to help coworkers. In order to eliminate possible selectivity effects, we combine a matching approach with difference-in-differences. We identify the proportion of employees participating in profits and differentiate profit sharing according to the percentage of the workers covered by such remuneration schemes. Using German establishment data we find that profit sharing only has a significant effect on training intensity if the majority of the workforce benefits from it.JEL Classification: C14, J33, M52, J24

Do Dominant Firms Provide More Training?

“…These variables capture whether or not employees are paid by results, receive merit pay, receive profit related payments or bonuses, or can purchase company shares. Such reward structures are often associated with reduced managerial supervision, reduced chance of layoff and increased training (Kraft and Lang, ). While some of these new controls emerge as significant, there is little indication that they are critical omitted variables, as the magnitude of the market structure estimates remains relatively stable.…”

Uncertainty, hiring and firing costs, and the determinants of profit‐sharing rules

“…See also the paper by Kraft and Ugarkovi c (2006), which uses a German panel dataset and finds that the introduction of profit sharing raises profitability. Finally, Kraft and Lang (2013) use German establishment data and find that profit sharing only has a significant effect on training intensity if the majority of the workforce benefits from it. pay in profit-sharing firms.…”

“…Although a large number of firms have adopted profit-sharing schemes (PSSs henceforth) around the world,1 most prior studies on PSSs focus on the schemes' impact on labor productivity, training intensity, unemployment, or the wage rate (see, e.g., Estrin & Wadhwani, 1989;Kraft & Lang, 2013;Weitzman, 1983Weitzman, , 1985.2 Fewer studies have investigated the determinants of the profit sharing rate. These studies, however, abstract from either the employment decision (Moretto & Pastorello, 1998;Moretto & Rossini, 1995) or the hiring costs (Koskela & Stenbacka, 2004, even though firms often incur substantial sunk costs in hiring and/or firing workers.…”

“…Although a large number of firms have adopted profit‐sharing schemes (PSSs henceforth) around the world,1 most prior studies on PSSs focus on the schemes' impact on labor productivity, training intensity, unemployment, or the wage rate (see, e.g., Estrin & Wadhwani, 1989; Kraft & Lang, 2013; Weitzman, 1983, 1985). 2 Fewer studies have investigated the determinants of the profit sharing rate.…”

Are firms with financial participation of employees better off in a crisis? Evidence from the IAB Establishment Panel Survey

“…There are some different empirical studies, which refer to the relationship between FPE and investments in human capital respectively training activities (Robinson & Zhang, 2005;Pendleton & Robinson, 2011;Kraft & Lang 2013). Others consider some measure of employment stability (Gielen, 2011;Green & Heywood, 2011).…”