Profit Sharing and Macroeconomic Stability

In this paper we draw on the similarity between wage indexing and profit sharing, both wage fixing rules, to compare, along the lines of the literature on indexation, the macroeconomic stability properties of Wage and Share Economies “a la Weitzman”. We argue that, in the model used by Weitzman, a Wage Economy as much as a Share Economy can be maintained in a regime of excess demand for labour and find instances where a Wage Economy performs better than a share Economy in the same regime. We also suggest a choice of ex ante excess demand for labour parameter such as to minimize the variance of inflation