Profit Sharing and Company Performance

There has been a long tradition of academic research on the nature and consequences of employee financial participation. Due to its various potential benefits, this topic has recently attracted renewed interest both among academics and policy-makers in Europe. Marija Ugarkovic examines whether financial participation can contribute to a more equitable distribution of income and wealth, whether it can increase employment and lead to improved company performance. The author uses a large-scale German establishment panel and proves the beneficial impact on productivity and employment. In addition, she shows that profit sharing does not lead to a reduction of base wages but is paid in addition to regular wages. It becomes evident that profit sharing has more positive effects for large firms than for small and medium-sized companies.