Profit Sharing and Productivity: Further Evidence from the Chemicals Industry

Profit sharing potentially augments productivity by affecting motivational variables that promote group norms favoring effort. A factor augmentation model of production is developed to measure the impact of profit sharing on productivity using a test industry in U.S. manufacturing. The model is applied using alternative exogenous and endogenous specifications for the profit-sharing incentive variable. The results are consistent with those obtained in other recent studies and suggest that profit sharing results in improvements in productivity.