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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 65:
Trade unions, employee share ownership and wage setting: A supply-side approach to the share economy

Thomas I. Renström and Kasper Roszbach ()

Abstract: Employee share ownership is growing increasingly important. This paper studies employee share ownership in an economy with one monopoly union for each firm. We modify an implicit contra t model by adding dividend income to the usual wage income. Union members differ in exogenous stock endowments and choose wages under majority rule. As a result, wages are decreasing in stock endowments and a skewed distribution of stoc k-capital leads to higher wages and lower employment. Switching to a more equal distribution can increase employment and production. An optimal portfolio rule suggests that macroeconomic gains can be made from limiting the diversification of portfolios. Last, we show how the transfer of shares to employees can be made economically feasible.

Keywords: Trade unions; profit sharing; distribuion; voting; portfolio choice; (follow links to similar papers)

JEL-Codes: J51; J30; D63; D72; G11; (follow links to similar papers)

35 pages, August 1995

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