PROFIT SHARING AS A STABILIZATION TOOL

Abstract

We provide both descriptive and technical explanations of the theory of profit sharing as proposed by Weitzman. An empirical study is done using Singapore's macroeconomic data. Two results from implementing the flexible wage system in Singapore are observed. Firstly, the introduction of the system contributes to the decrease in unemployment rate. Secondly, the decrease in unemployment variability is more suggestive than definitive, as regression results do not attain statistical significance. We briefly discuss the benefits and criticisms to implementing the share economy. Although the criticisms to implementing the share economy are many, the idea of the burden of risk being passed from the firms to the workers has not been as popularly expounded as other criticisms like the efficiency wage hypothesis. The last Chapter discusses risk as one of the obstacles to implementing the share economy.