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Profit Sharing the Firm-Size Wage Premium
Pehkonen, J., Pehkonen, S., Strifler, M., & Maliranta, M. (2017). Profit Sharing the Firm-Size Wage Premium. Labour, 31(2), 153-173. https://doi.org/10.1111/labr.12092
© 2017 CEIS, Fondazione Giacomo Brodolini and John Wiley & Sons Ltd. This is a final draft version of an article whose final and definitive form has been published by Wiley. Published in this repository with the kind permission of the publisher.
This study analyzes the relationships among wages, firm size, and profit sharing schemes. We develop a simple theoretical model and explore the relationship empirically using high-quality panel data. The theoretical model shows that the firm-size wage premium decreases in the presence of profit sharing. The empirical results based on rich matched employee-employer data for private sector wage earners in Finland show that the firm-size wage premium is modest, and it becomes negligible when we account for profit sharing and covariates describing assortative matching and monopsony behavior. The analysis suggests that profit sharing schemes embody effects of firm-specific unobservables that raise productivity, support rent sharing, and boost wages.
ISSN Search the Publication Forum1121-7081
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