The Effects of Mandatory Profit-Sharing on Workers and Firms: Evidence from France

88 Pages Posted: 25 Jun 2023 Last revised: 19 Jun 2024

See all articles by Elio Nimier-David

Elio Nimier-David

University of Chicago - Booth School of Business

David Alexandre Sraer

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

David Thesmar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: June 15, 2023

Abstract

Since 1967, all French firms with more than 100 employees have been required to share a fraction of their excess profits with their employees. Through this scheme, firms with excess profits distribute, on average, 10.5% of their pre-tax income to workers. In 1990, the eligibility threshold was reduced to 50 employees. We exploit this regulatory change to identify the effects of mandated profit-sharing on firms and their employees. The cost of mandated profit-sharing for firms is evident in the significant bunching at the 100-employee threshold observed prior to the reform, which completely disappears post-reform. Using a difference-in-difference strategy, we find that, at the firm level, mandated profit-sharing (a) increases the labor share by 1.8 percentage points, (b) reduces the profit share by 1.4 percentage points, and (c) has no significant effect on investment and productivity. At the employee level, mandated profit-sharing increases low-skill workers' total compensation and leaves high-skill workers' total compensation unchanged. Overall, mandated profit-sharing redistributes excess profits to lower-skill workers in the firm without generating significant distortions or productivity effects.

Keywords: profit-sharing; productivity; wage-setting; investment

JEL Classification: J00; G30

Suggested Citation

Nimier-David, Elio and Sraer, David Alexandre and Thesmar, David, The Effects of Mandatory Profit-Sharing on Workers and Firms: Evidence from France (June 15, 2023). Chicago Booth Research Paper No. 24-19, Fama-Miller Working Paper , Available at SSRN: https://ssrn.com/abstract=4480616 or http://dx.doi.org/10.2139/ssrn.4480616

Elio Nimier-David

University of Chicago - Booth School of Business ( email )

5807 S Woodlawn Ave
Chicago, IL 60637
United States

David Alexandre Sraer (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

David Thesmar

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
738
Abstract Views
2,067
Rank
66,879
PlumX Metrics