Working Paper

Goods-market competition and profit sharing: a multisector macro approach

Abstract: This paper develops a theoretical model that relates the degree of goods-market competition with the extent of profit sharing. The authors multisector framework indicates that increased competition in goods markets leads to an increased weighting on firm profits in an optimally indexed contract. Consequently, our model predicts that a rising extent of profit-sharing arrangements in actual U.S. contracts should accompany an increase in the degree of goods-market competition. Available, but limited, data on profit sharing in the United States is generally consistent with this fundamental implication of the model.

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 1997

Number: 9709

Note: Published as: Duca, John V. and David D. VanHoose (1998), "Goods-Market Competition and Profit Sharing: A Multisector Macro Approach," Journal of Economics and Business 50 (6): 525-534.