Public Profit Sharing

25 Pages Posted: 21 Jul 2001

See all articles by Ronnie Schöb

Ronnie Schöb

Freie Universitaet Berlin; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2001


Many countries suffer from persistently high unemployment rates. The scope for labor market reforms is often limited to measures that hurt neither shareholders nor workers. This paper develops a policy proposal, which allows the government to reduce wage costs without changing the income positions as determined in the process of wage negotiations. It is shown that the introduction of public profit sharing, i.e., substituting profit share for social security contributions, can boost employment both in the short run and the long run. Calibrating the model and comparing the results with recent empirical findings about the impact of labor taxation confirm the theoretical findings.

Keywords: Public Profit Sharing, Trade Unions, Unemployment, Labor Market Reform

JEL Classification: E60, J51, C70

Suggested Citation

Schöb, Ronnie, Public Profit Sharing (May 2001). CESifo Working Paper Series No. 489. Available at SSRN:

Ronnie Schöb (Contact Author)

Freie Universitaet Berlin ( email )

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Berlin, Berlin 14195

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679

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