Profit Sharing in Portugal: Why Higher Productivity? Luis Moura Ramos Abstract. The paper studies some characteristics of Portuguese profit-sharing PS) firms based on a sample of 192 manufacturing firms. Some issues are examined that could help explain observed productivity differences such as the performance contingency of PS payments and the complementary or substitution nature of these payments regarding wages. The higher productivity found for PS firms seems to be more related to higher total remuneration in these firms than to the specific PS pay formula. The issues of why, how and by whom PS payments are determined could clarify the exact nature of our findings. 1. Introduction The debate on profit sharing PS) now seems to be on the empirical side as, since Weitzman's share economy proposal, theoretical arguments have been widely presented and discussed see Cugno, Ferrero, 1990, for a survey). Different legal frame- works and industrial relations traditions are know to influence the way PS is able to be an effective incentive system; it therefore makes sense to study how PS firms perform in different settings. This paper studies some characteristics of Portuguese PS firms in addition to the broad picture traced by the PEPPER Report 1990) and PEPPER Report II 1996). The comparative analysis high- lights some issues that could help to explain productivity differences such as the performance contingency of PS payments and the complementary or substitution nature of these payments regarding wages. LABOUR 16 1) 157±175 2002) JEL J32, J33 # 2002 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishers Ltd, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA. Luis Moura Ramos, Faculdade de Economia da Universidade de Coimbra, GEMF Grupo de Estudos MonetaÂrios e Financeiros), Av. Dias da Silva 165, 3004±512 Coimbra, Portugal. E-mail: LMRamos@sonata.fe.uc.pt.