Capital Structure, Wage Bargaining and Employment
نویسندگان
چکیده
We offer a unified framework to analyze the determination of employment, employee effort, wages, profit sharing and capital structure when firms face stochastic revenue shocks. We apply a generalized Nash bargaining solution, which extends the wage bargaining literature by incorporating efficiency wage considerations, profit sharing and capital structure. The profit sharing instrument is demonstrated to have positive effort-augmenting and wage-moderating effects, which exactly offset the negative dilution effect in equilibrium. Leverage is shown to reduce employment and to have a strategic commitment value as a wagemoderating mechanism for firms facing unions in bilateral wage negotiations. Finally, some implications for equilibrium unemployment are discussed.
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