The Output, Employment and Productivity Effects of Profit Sharing: A Matching Approach by

We investigate the output, employment and productivity effects of profit sharing. A simple theoretical model demonstrates that positive incentive effects of profit sharing imply increased employment and output, but productivity measured as output divided by employment might be much less affected. In the second part of the paper the results of an empirical study are reported. By use of matching and conditional difference in difference methods we find that the introduction of profit sharing leads to higher growth rates, more employment but not to increased productivity levels.