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Profit sharing and firm size: the role of team production

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>08/2009
<mark>Journal</mark>Journal of Economic Behavior and Organization
Issue number2
Volume71
Number of pages13
Pages (from-to)246-258
Publication StatusPublished
<mark>Original language</mark>English

Abstract

This paper presents a model showing that profit sharing is subject to the 1/N problem in the case of independent worker productivity but not in the case of interdependent worker productivity. This implies the role of firm size on the likelihood of profit sharing will differ by the nature of the underlying technology. We test this implication using German establishment data and using a proxy for interdependent worker productivity. The results conform to the theory showing that firm size is associated with reduced profit sharing use when technology is independent but not when technology is interdependent.