Economic Effects of Alternative Compensation Systems

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The purpose of this project is to generate rigorous econometric evidence on the economic effect of alternative, compensation systems. Particular emphasis is on examining various profit sharing systems, studying the consequences of differing institutional arrangements for levels and variability employment, analyzing rates of investment, and examining the survival and productivity of firms. This work will draw on results from the previous award where a very detail longitudinal data set of profit sharing firms was assembled. The analysis of this data has focused on exploring the relationship between levels of unemployment and alternative compensation systems. $$$ Recently, considerable attention has been paid to alternative forms of business organization and of workers' renumeration schemes. In part, this reflects the disappointing macroeconomic performance of most industrial nations during the past decade, and a perception that many American industries were losing their ability to compete with foreign firms. The failure of these economies to attain full employment with stable prices has stimulated interest in alternative labor compensation schemes that would link part of employee compensation to the performance of the firm, and thereby improve worker productivity and the firm's competitiveness. These compensation arrangements include profit sharing, employee share ownership, and productivity gain sharing. This project is important because it will provide a better understanding of how alternative worker compensation systems might improve the performance of the US economy.