Just a Question of Selection? The Causal Effect of Profit Sharing on a Firm's Performance

24 Pages Posted: 3 Jun 2016

See all articles by Kornelius Kraft

Kornelius Kraft

University of Dortmund - Department of Economics; IZA Institute of Labor Economics

Julia Lang

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Date Written: July 2016

Abstract

Using German firm panel data, we analyze the productivity effects of profit sharing. Because selectivity should pose a severe problem in this context, we combine matching with a difference‐in‐differences approach. This method enables us to rule out potential bias. Our results suggest that selectivity does indeed matter. Firms with very special characteristics apply profit sharing. We find that these establishments are already more productive before they decide to implement profit sharing. Nevertheless, after accounting for selection, our results show that the introduction of profit sharing leads to a significantly higher productivity in these firms.

Suggested Citation

Kraft, Kornelius and Lang, Julia, Just a Question of Selection? The Causal Effect of Profit Sharing on a Firm's Performance (July 2016). Industrial Relations: A Journal of Economy and Society, Vol. 55, Issue 3, pp. 444-467, 2016, Available at SSRN: https://ssrn.com/abstract=2789210 or http://dx.doi.org/10.1111/irel.12145

Kornelius Kraft (Contact Author)

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany
+49 231 755-3152 (Phone)
+49 231 755-3155 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Julia Lang

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

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