The Effects of Profit-sharing Schemes on Enterprise Performance in France

Abstract

France has one of the most extensive sets of legislative provisions in favour of profit-sharing and one-third of all non-government employees are covered by at least one subsidised scheme. Subsidised, regulated schemes include statutory profit-sharing (participation), which is compulsory in all firms with 50 employees or more, and voluntary profit-sharing (intéressement). This paper assesses the effects of voluntary profit-sharing on total factor productivity in small and large firms and the importance of the technological context in which the schemes are implemented. A production function is estimated on a representative, five year unbalanced panel of around 5000 French firms a year in industry and services, controlling for market power, skills and pay levels. Voluntary profit-sharing is found to significantly increase total factor productivity and to affect the shape of the technology. The effect of the voluntary scheme is greater in firms also required to have a statutory scheme. In these larger firms, profit-sharing and close supervision of blue collar and clerical employees may have conflicting effects if they are combined.